MBIT Thesis

Mobile Virtual Network Operator (MVNO)

Professor: Author:
Date

Dr. Gregory Yovanof T. Bassayiannis
08/12/2008

Table of Contents
1. 2. Mobile Virtual Network Operator (MVNO) - Abstract ..........................................................................5 The MVNO ..........................................................................................................................................6 2.1 The Beginning of MVNOs ...........................................................................................................8 2.2 The Value-chain & Value Net ...................................................................................................12 2.3 The players ...............................................................................................................................15 2.4 Mobile Solutions .......................................................................................................................16 2.5 Characteristics of an MVNO .....................................................................................................16 2.6 A typical MVNO Business Model ..............................................................................................17 2.7 MVNO Defined From a Customer Perspective.........................................................................17 2.8 MVNE (MVNO Enabler)............................................................................................................19 2.9 MVNO & MVNE ........................................................................................................................20 2.10 Why MVNOs make sense.........................................................................................................20 2.11 Key driving factors enabling the MVNO opportunity .................................................................22 2.12 The MVNO opportunity .............................................................................................................22 2.13 MVNO opportunities increase with 3G rollout...........................................................................22 2.14 The overall MVNO business context ........................................................................................23 2.15 MVNOs Backgrounds (Legacy and Next generation MVNO Models) ......................................24 2.16 Where is the MVNO today ........................................................................................................26 2.17 Next generation MVNOs...........................................................................................................26 3. MVNOs: Identities and Distribution ...................................................................................................28 3.1 MVNOS Global Initiative ...........................................................................................................28 3.2 MVNO Global market share......................................................................................................31 3.3 The Future of MVNOs in the 3G Era ........................................................................................32 3.4 Global MVNO Distribution.........................................................................................................32 3.5 MVNO Global Market Forecast (2006-2012) ............................................................................33 3.5.1 The Customer Segments......................................................................................................33 3.5.2 The Revenue Model (an example) .......................................................................................34 3.5.3 MVNO business Models .......................................................................................................34 3.6 MVNO Adoption in Europe - 151 MVNOs.......................................................................................40 3.6.1 Fixed telephony MVNOs in Europe ......................................................................................40 3.6.2 MVNO/MNO European Market share ...................................................................................41 3.6.3 MVNOs in Europe: numerous initiatives, very few successes ..............................................41 3.7 MVNO Adoption in Greece .............................................................................................................42 3.7.1 The MVNOs in Greece .........................................................................................................42 3.7.2 Mobile Network Operators customer base (June 2008) .......................................................43 3.7.3 MVNO Figures ......................................................................................................................44 3.7.4 MNOs ARPU and AMOU......................................................................................................44 4. MVNO/ MNO/ MVNE Benefits and Drawbacks .................................................................................45 4.1 Advantages/ Benefits................................................................................................................45 4.2 Disadvantages/ Drawbacks ......................................................................................................46 4.2.1 MVNE trends ........................................................................................................................48 4.2.2 MVNE Uses in Europe..........................................................................................................48 4.2.3 MVNO-MVNE-MNO Functional Model .................................................................................49 4.2.4 Viability of Virtual Mobile Players..........................................................................................50 4.2.5 Sustainability.........................................................................................................................51 4.2.6 Brand identity in Mobile Services..........................................................................................51 4.2.7 Type of Companies attracted to the MVNO Model ...............................................................52 4.2.8 VALUE TO MNO...................................................................................................................53 4.2.9 VALUE TO MNO & MVNO ...................................................................................................53

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4.2.10 VALUE TO MVNO ............................................................................................................53 4.2.11 Different approaches to mobile services...........................................................................54 4.2.12 Execution & Fulfilment ......................................................................................................56 4.2.13 Business Planning ............................................................................................................56 4.2.14 Business Design ...............................................................................................................57 4.2.15 Business Infrastructure .....................................................................................................57 4.2.16 Production Support ...........................................................................................................58 4.2.17 Conclusion ........................................................................................................................59 4.2.18 MNO Motivations (to host MVNOs)...................................................................................60 4.2.19 Host MNO Benefits ...........................................................................................................60 4.2.20 Host MNO Requirements..................................................................................................61 4.2.21 Host MNO Wholesale Business Potential (Example) .......................................................61 4.2.22 The MNO Perspective ......................................................................................................61 4.2.23 The MVNO Perspective ....................................................................................................62 4.2.24 MVNOs rationales.............................................................................................................64 4.2.25 MVNOs positioning ...........................................................................................................64 4.2.26 Key challenges faced by MVNOs .....................................................................................68 5. The MARKET structure & opportunities ............................................................................................70 5.3 MVNO market drivers ...............................................................................................................70 5.4 MVNO market structure ............................................................................................................70 5.5 Market size ...............................................................................................................................71 5.6 MVNE value..............................................................................................................................71 5.7 Aggregation business model benefits.......................................................................................71 5.8 Key Requirements ....................................................................................................................72 5.9 Competition is intensifying –mobile premiums decrease..........................................................72 5.10 Local scale is key to achieving EBITDA margin ambitions .......................................................74 5.11 Operators need to adjust ..........................................................................................................74 5.12 The challenger strategy must be tailored to the market environment.......................................75 5.13 Marketing strategies .................................................................................................................75 5.14 Timing .......................................................................................................................................76 5.15 Provider Selection criteria.........................................................................................................77 5.16 MVNO Services ........................................................................................................................77 6. MVNO BUSINESS SETUP ...............................................................................................................80 6.1 Setting-up Strategies ................................................................................................................80 6.2 Key Issues MVNO players are faced with ................................................................................80 6.3 Issues per player ......................................................................................................................81 6.4 Targets per player.....................................................................................................................82 6.5 Business Case Structure ..........................................................................................................82 6.6 MVNO Business Guide.............................................................................................................83 6.7 The MVNO Business: High Entry Barriers and Risks ...............................................................83 6.7.1 Barriers .................................................................................................................................83 6.7.2 Launch Risks ........................................................................................................................84 6.8 The future of MVNOs................................................................................................................85 6.9 Implementing an MVNO ...........................................................................................................86 6.10 Modeling MVNOs: The Big Picture ...........................................................................................90 6.11 Critical Success Factors ...........................................................................................................94 6.12 Closing remarks........................................................................................................................96 7. Conclusions.......................................................................................................................................97 7.1 Conclusions & Lessons to be learned ......................................................................................97 7.2 Conclusions regarding the future....................................................................................................98 7.3 Three improvement suggestions ....................................................................................................99 8. References......................................................................................................................................100

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9. Annex 1 - Case Study – Western Europe Cellular revenues ..........................................................101 10. Annex 2 - MVNO Experience ......................................................................................................107 Annex 3 - Glossary................................................................................................................................109

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1. Mobile Virtual Network Operator (MVNO) - Abstract
This thesis addresses the phenomena of Mobile Virtual Network Operators (MVNO): often MVNO do not come from the telecom sector but they rent the network of mobile operators to become fully mobile operators on their own. So they compete directly not only with the other mobile operators but also with their hosting mobile operator. Hosting MVNOs, supporting them from both operational and commercial perspectives are new challenges for the mobile operators: they have to set up a specific internal organization because they used to be a vertically integrated industrial structure. All of this represents tremendous changes for them. The aim of the thesis is to research and analyze the current status of the MVNO industry, present different views on implementation approaches, identify markets and market segments served, note weaknesses and strong points, refer to successes and failures, research current legislation(s)/ regulatory aspects (that are an essential driver for the liberalization of network economies) and in general show the industry’s evolution path over time. The key element is to see if the MVNO is able to increase the efficiency and competitiveness of mobile markets in specific. Additionally, starting from the Western European market, an effort will be made to specifically analyze the case in the Greek MVNO market by providing some specific data such as type of service (prepaid/postpaid), airtime replenishment volumes (prepaid case), brand awareness, market segments, penetration/ adoption rates, etc). Having gone through the MVNO insights at the end, a description of all the steps involved for an entity/ business, in becoming an MVNO from scratch (in the form of a generic guide) will be prepared. A stepby-step approach will be used for implementing a Mobile Virtual Network Operator (MVNO), stating actions to be adopted and mistakes to be avoided. Given that most of the current implementations have followed different/ diversified paths (depending on the market needs to be served each time as well as the intended capital investment by the MVNO candidates), an effort will be made to come up with guidelines (hopefully the most suitable ones, having learned from former/recent MVNO adoptions) for aiding such future implementations. Another important aspect is the modeling of a mobile network: the MVNOs will use some components while other components are un-useful for them. Without such model, it is impossible to derive the right costs and price to be charged to the MVNO in order to have a win-win industrial model for both the MVNO and its hosting operator.

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2. The MVNO
There is a lot of definitions for MVNOs in the sector but a sound definition of virtual operators would consist in saying they are actors not totally integrated who lack at least a part of the asset at the basis of the network.. Applied to mobiles, this means they do not own the radio access. However they supply to the market a complete mobile service and they own partially or totally their customers. They rent at least the radio access to their hosting operator but nothing prevents them to rent more than that to the operator as some elements of the service provided to the end user (billing, contact center, …). They also complete the radio access by their own assets like a transport network or some switching infrastructure. However MVNO today are most of the time simple resellers of mobile services that the hosting operator operates technically. Scarcity of spectrum has allowed only 3 to 5 mobile operators with a full infrastructure per country via a licensing process. However it appeared quickly this number was insufficient to have a fully efficient (and competitive) market despite the existence of 3 to 5 competing networks. National Regulatory Authorities (NRA) has seen MVNO as a (too) quick remedy at least for the access mobile market. This new kind of actors was deemed to bring more competition (which is not an objective in itself) that would boost innovation and economic welfare. Today NRAs consider other remedies like spectrum trading as a means to enable more innovation in wireless sector. However MVNO remain an efficient means to break the vertical integration of MNO that is considered by some authors as one of the root cause for a player not to innovate any more; the MVNO comes indeed between the MNO and the end user. Other authors consider on the contrary that vertical integration allows economies of scale and scope that amortizes more easily investment. It is an incentive to take more commercial and financial risks. MVNOs too use 3rd parties for their own innovation so that this argument may not sound completely true. The multiplication of wireless technologies, the emergence of UMA and IMS will demand new players active on multiple networks without having the opportunity to own all of them. They will become de facto virtual operators on other’s assets to operate their services seamlessly across networks and technologies. Such virtual operators will be innovation-driven. Another more accepted obstacle to innovation in network economies are the guaranteed incomes that mobile operators can expect due to their oligopoly situation. The mobile sector is indeed a kind of oligopoly with guaranteed income. MVNO can break this situation as the guaranteed income is based on the difference between the costs of the network (assets), the revenues and the limited number of players. An MVNO does not own a network and is not stuck to this logic.

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MVNOs are considered as independent service providers willing to access the mobile operator’s radio network in order to develop and sell product and services competing directly with the mobile operators. billing and customer care. MVNOs that operate as resellers are likely to require an ASP licence. A full MVNO is one that owns or provides network facilities and network services such as towers. cellular mobile services or mobile application services and an ASP licence to provide public cellular services to end users. While they may still be able to offer their own branded packages. resellers are completely dependent on MNOs for every aspect of service provision. operate its own HLR and offer its own SIM cards with its own mobile network code. In addition. Additionally. So. Full MVNOs are able to secure their own numbering ranges. These service providers are still able to maintain some independence from MNOs as they are able to differentiate their products. full MVNOs will require an application service provider (“ASP”) licence in order to provide public cellular services to end users. Enhanced resellers may require NSP individual licence if they provide bandwidth services. offer its own SIM card and have full flexibility on the design of the services and tariff structures. MVNO Page 7 of 110 . enhanced resellers rely on MNOs for access to the radio network and network facilities. The key feature that distinguishes enhanced resellers from enhanced service providers is that enhanced resellers do not have their own SIM cards. Enhanced resellers are likely to carry out customer care and billing in house. as well access to radio network. Full MVNO Owns everything (including HLR) except the radio network equipments. Enhanced resellers are primarily distributors who resell services provided by MNOs. So. cellular mobile services or mobile application services and an ASP licence for providing public cellular services. full MVNOs are likely to require a network facilities provider (“NFP”) individual licence and a network service provider (“NSP”) individual licence for the network facilities and network services that they own or provide. enhanced service providers are those who do not own or provide network facilities but have the ability to secure its own numbering range. In most cases. This type of access could be regarded as unbundling of the radio subsystem in the mobile telecommunications network. They are dependent on MNOs for network facilities. and will to some extent be analogous to local loop unbundling (LLU). However. they will not be able to distinguish their services by their MNC. Enhanced service providers may require NSP individual licence if they own or provide bandwidth services. home location registers (“HLR”) and cellular mobile services. ESP: Enhanced Service Provider (Hybrid MVNO) Procures their own SIM cards and controls a few network elements. A key feature that distinguishes a full MVNO from other business models is its ability to operate independently of the MNOs. other form of MVNOs and MNOs as resellers have direct relationship with end users. As with enhanced service providers. mobile switching centres.There are different kinds of MVNOs Classic Service Provider (reseller of the GSM operator offers) Resellers merely resell subscription to end users. end users will not be able to make a distinction between resellers.

"In the beginning. the market can accommodate a few extra niche players. within a 10-month span. but gradually it increased mainly by word of mouth. If they can hold their nerve and not panic and accept some leakage. this first online SIM-based concept was a niche concept and targeted only a small share of the market. Along those lines. They prepaid a single per-minute rate regardless of what time of day they made a call or whether they called a mobile or fixed line. Telmore launched an MVNO business solely online. using phones they already owned. Telmore had attracted 10 percent of the mobile market. MVNOs though will only really have an impact if the incumbents lose their nerve on price and try to follow them down. Customers bought SIM cards only (solely on-line). Provides services over the mobile platform Combines the reseller and the service provider business models Owns portion of the mobile network with or without SIM cards depending on choice of mobile technology of the MNO Has more control of the mobile network and enables mult operator agreements Service Provider: Enhanced Service Provider: MVNO: Complete MVNO: MVNO Page 8 of 110 . This first MVNO model however has paved the way for others to follow.1 The Beginning of MVNOs It all started in 2000 in Denmark with what was then a small start-up called Telmore. however pioneering. Perhaps more importantly. Within three years. it went slowly. Using the mobile network of the former state operator TDC. the price of a prepaid minute in Denmark had dropped by 50 percent. Pictorially the different kinds of MVNOs can be seen below: Radio access Host MNO Host MNO Host MNO Switches & other network elements Services & content CRM & Billing Marketing & branding Distribution Reseller Enhanced Service Provider Full MVNO NOTE: GSM operators are referred to as « MNO – Mobile Network Operators » Therefore in short each of the business models practically means that: Reseller: Enhanced Reseller: Buys bulk airtime from the MNO and resells to target segments Offer their own branded packages but they will not be able to distinguish their services by their MNC. Enhanced resellers are likely to carry out customer care and billing in house.2.

They will establish their own tariffs. email services separately from those the host MNO can support. typically SMS or MMS. ‘Thin’ MVNOs will normally source their own billing and customer care services. or offer advanced Internet. and WAP gateways. The figure below shows a typical MVNO infrastructure showing (in green) what a ‘thin’ one might provide and the additional features (in blue) that a ‘thick’ MVNO could offer MVNO Page 9 of 110 . advanced messaging (MMS or SMS) services. They won’t be able to provide custom facilities like voicemail. This allows these virtual operators to provide advanced services such as VoIP. more sophisticated email products or custom-built handsets.Depending on the extent of involvement/ adoption in the value chain. will frequently run some of their own network services. overseas-call routing. voicemail. routing for overseas calls. usually with simple Internet access and some premium content services. some other way of looking at the business models involved can be seen below. customer care mechanisms. in addition to their own billing and customer care. and provide their customers with basic voice/text services. ‘Thick’ MVNOs.

Infrastructure Matrix Offered primarily to nontelecom companies or telecom companies wanting to diversify without significant investments Offered to companies with some experience in telecommunications who can take over some of the responsibility for providing key services Network Rollout The mobile network roll-out follows three MVNO Lifecycle clear stages. MVNO Page 10 of 110 .

offer packaging.Strategy Development. (through all the technology and support needed) to service the target market and start generating revenue. Traditional billing systems do not meet the requirements of an MVNO MVNO need Low TCO Motivation Insufficiencies today • Fewer subscribers to carry total cost of billing • • Solutions do not scale down costefficiently Incomplete solutions Easy introduction of new services • • • Limited billing competence Excellence in time to market critical The core business and growth opportunity Focus on core business with lean organization • • Products build to be run by large billing departments Cross-product dependencies Future-proof growth into mobile and VAS Opportunity for outsourcing • • Legacy products lacks in architectural flexibility MVNO Page 11 of 110 .

The figure below gives a picture of the Porter’s “Five Forces” framework: The power of the five forces – Suppliers. Emotional. which has become the standard approach to these analyses. such as the telecommunication industry. The state of competition in an industry depends on five basic competitive forces. In his book ”Competitive Advantage” [4] Michael Porter suggested analyzing the “cost leadership” and “differentiation” strategies by means of the value chain model.2 The Value-chain & Value Net The Value Chain By looking at the value chain and considering the involved enablers (Technical. spectrum. Buyers. depends on the state of competition. The attractiveness of an industry. or between ASPs. Potential Entrants. profit) it can be said that MVNOs fall between emotional and spectrum enables (between service and network operators. An effective competitive strategy according to this approach takes offensive or defensive action in order to create a defendable position against the five competitive forces. Competition in an industry is rooted in the underlying economic structure of the industry. Substitutes and Rivalry among existing firms – depends on some major factors and characteristics listed in the work of Porter. physical.2. ISPs and Portals from one side and Mobile Network Operators from the other) The standard approach to the analysis of industry attractiveness is Michael Porter’s Five Forces framework. MVNO Page 12 of 110 .

Complementors are added as a new dimension. Figure 2: The Value Net A player is a complementor if customers value your product more when they have that player’s product than when they have your product alone. Logically.Figure 1: Porter’s Five Forces The Value Net The Value Net can be seen as a generalization of the Five Forces framework. Complementors will influence the attractiveness of an industry. A player is a competitor if customers value your product less when they have that player’s product than when they have your product alone. The Value Net emphasizes that the value to the customers can depend on a package of complementary services and/or products. MVNO Page 13 of 110 . Figure 2 gives a picture of the Value Net of a company.

network providers. investment. Intangible value exchanges . that when brought together. Two primary types of value can be distinguished: 1. a new value network with different types of interactions between stakeholders will be needed in the new MVNO market. MVNO Page 14 of 110 . groups or organizations. The fact that consumers would like to have only one billing relation will most likely consolidate the number of actors. will create value for the customers and at the same time.Also. Tangible value exchanges . risk and revenue sharing are arranged. Therefore. services or revenue 2. The set of arrangements between the different actors will include how profit. a value network can be seen as a web of relationships that generates economic value and other benefits through complex dynamic exchanges between two or more individuals. cost. in an MVNO implementation an extended personalization concept is presented that enables value networks of content providers.involve all exchanges of goods. The value network is important part of the organisation design presented by Faber [Faber 2005]. New networks will consist of many different actors that have certain resources and capabilities. and service providers to offer personalized services to mobile users in a way that suits their individual needs at a specific place and time. To that extend.include two primary subcategories: Knowledge and Benefits. realise their own strategies and goals.

offering a compelling value proposition. to network etc.0 services: . Examples of models belonging to the Service centric category are the WEB 2. The Service Provider bundles this seamless access with a number of aggregated services. .Model_2: (MySpace.3 The players Along the value chain. Network effects help to drive the adoption and value of the service. This is the case exactly for all MVNO types. Sometimes the SPs syndicate their content to 3rd parties like Google or Yahoo. facilitating the business model.Model_1 (Flickr. as well as operators. Value adding services are being offered as a premium for which the customer has to pay. the involved parties/ players include several types of providers ranging from service. Skype): The model is based on technical innovation. YouTube): The business model is based on network effects created by a user base and user interaction. to content. MVNO Page 15 of 110 . 2. Technology is important as an infrastructure tool.MVNO .A Service Centric Business Model In the Service Centric Business Model a Network Provider offers seamless access on a number of core and access networks. A community is built around content like User Profiles for MySpace or interesting Blogs as is the case for Gawker.

MVNO Page 16 of 110 . or wireless infrastructure but give a virtual appearance of owning a wireless network. These operators lease the wireless capacity from traditional operators and then repackage it for a specific vertical industry application.5 Characteristics of an MVNO • MVNOs are new breed of wireless network operators who may not own the wireless spectrum.Content Provider Mobile Application Providers Mobile Marketing System Integrators Internet Service Providers Content Value Addition Delivery Enterprises / Mobile Subscriber Internet-to-mobile service providers Modem-based service providers Short-Code Operators MVNOs (for Data Services) MNOs 2. In that sense MVNOs own the customers. • Main added value that MVNO provides is billing and customer care functions.4 Mobile Solutions An overview of the ICT component when implementing different MVNO types is as follows: 2. • MVNOs generally provide both voice and data services to end users through a paid up subscription agreement.

Different functions can be carried out by the MVNO or MNO.• To become an MVNO. and moreover Next Generation MVNOs. MVNOs typically have a strategic intent focused on a recognized brand. Some may be carried out by a Mobile Virtual Network Operator Enabler (MVNE) which may simplify the MVNO provisioning for either the MVNO or the MNO. just as Cosmote is seen as a network provider. 2. billing platform. It buys access from a host carrier—often perminute or per-megabyte—and resells it under its own brand and marketing. customer care and content delivery. MVNO Page 17 of 110 . Rights management. they need unique and compelling data services. as an MVNO is a customer driven. rather than just a brand. The term ‘MVNO' has become a catch-all for any consumer reseller. Most important. From a customer perspective both the MNO and the MVNO are their "Network Provider". Marketing. Considering the typical retail and network elements involved in an MVNO. MVNEs develop systems and processes to help facilitate MVNOs. channel management or billing. Portal. Success for those companies depended on delivering high-quality service. we have to look outside the legacy network led definitions of an MVNO. and therefore business driven business model. so there can be seen a variety of business models. with existing points of distribution and an already installed base of customers. not the host MNO (Cosmote). But a classic MVNO minimizes capEx and keeps expenses as successbased as possible.6 A typical MVNO Business Model At its most basic level. there is a range of MVNO classifications/ types between Service Providers (SP) and full MNOs. such as handset distribution. one should cobble together a partnership that consists of a connectivity of a regular Telco.7 MVNO Defined From a Customer Perspective To Fully understand the MVNO. a customer base. That doesn't mean upstarts wanting to become MVNOs can't succeed. Customer base 2. • An MVNO usually provides: Brand. That means leveraging outsourcing solutions for billing. That is in Greece for example Frog is seen to its customer as their network provider. as evidenced by Virgin or Boost—neither of which were pre-existing brands in the mobile space at their inception. and a sales channel. an MVNO is a standalone entity.

handset. or starter pack USE for calling. care centres. the handset itself. SMS. invoices. or other services PAY recharge or other payment method CARE get advice with questions or problems There are different ways of handling each stage: from the internet through to stores. MVNO Page 18 of 110 . other point of sale.Source: Christian Borman -2006 Customer experience The customer’s perspective is a simple four-stage process: Buy -> Use -> Pay -> Care BUY a SIM card.

customer base. MVNEs collect usage data and handle rating and billing functions. operation and evolution of the MVNO service is handled by the MVNE. An MVNE provides the technical architecture and may enter into a wholesale agreement with a host MNO. MVNEs form the backbone of an MVNO’s business of wireless Network Services providing help in broad areas of product development and marketing. but with partner companies creating the end-user services and interacting with the customer. The Limited MVNE is also the intermediary between the host MNO and a Reseller or Service Operator. Those companies are referred to as “MVNO candidates”.8 MVNE (MVNO Enabler) Most MVNOs will lack the experience of dealing with handset manufacturers and establishing upstream and downstream systems for service creation. MVNE’s provide the middle-ground in the sense that they can provide options to MVNOs for what they bring in-house versus what they rely on the host carrier. an MNO can also become an MVNE in order for it to directly support MVNO Resellers and Service Operators. For example. An MVNE does not have a relationship with end-user customers. a MVNE can provide HLR. Instead. administration and operations to OSS/BSS support. but cannot offer the service innovation that a Full MVNE can provide. an MVNE provides infrastructure (will interface with carriers to deflect the risk and costs) and services to enable MVNOs to offer services and have a relationship with end-user customers. and may go so far as to handle provisioning. billing. • Limited MVNEs operate elements of the service delivery infrastructure. Invoice and Settlement. but leave the mobile service provision to partner companies. and thus becoming MVNOs. it acts as an enabler for any number of MVNOs.2. Service Provisioning. distribution channels. MVNE is a service company delivering tools & services to companies wishing to market their services over a mobile network. Customer Relationship Management. Marketing functions are handled by the MVNO candidate: brand. the MVNE does not directly provide services to mobile users. hence the creation of the MVNE. to enable mobile service provision. Billing. building the capability and capacity to enable wholesale services from MNOs. However. fulfilment. in much the same way as a Service Operator. Instead. The set-up. Content Management. SMSC. The Full MVNE is the intermediary between the host MNO and a Reseller or Service Operator. content management and settlement. such that: • Full MVNEs operate a core mobile telecommunication infrastructure. and other systems. OSS/BSS. customer care and data centres. This type of MVNE parallels the Full MVNO by implementing the same technical architecture and host MNO wholesale agreements. In other words. The operating scope of MVNEs mirrors that of MVNOs. So a special case of the MVNO model is the MVNE. An MVNE offers infrastructure and related services ranging from network element provisioning. Some MVNOs want to completely rely on the underlying wireless network infrastructure of the host mobile network operator whereas other MVNOs want to own and/or control their own network elements. service assurance. order management. Profile Management. Revenue and Service Continuity Assurance etc. These outsourced services include: Data Services. MMSC. MVNEs often provide the “middle-ground” between MVNOs that do not want to have any control over network elements and those that want complete control. MVNO Page 19 of 110 . as well as more advanced network elements such as GGSN. Work Fulfilment. In other words.

2. At one side of the spectrum. flexible service deployment and the operational simplicity of a hosting service. The technical issues of setting up an MVNE are similar to those faced by an MVNO. Leveraging an MVNE brings the MNO the benefit of significant wholesale traffic volumes from multiple third-party service providers. MVNEs seek to fill this gap by providing the flexibility to support diverse services provided by a number of segment-specific thirdparties. One of the major issues operators consider with any market segment is risk. access to new service platforms. Sometimes there's a little data flavour. The difference is in the customer interface. 2. MVNO Page 20 of 110 . the ideal MVNO actually complements and extend the network operator's offering. It's arguable that the major mobile network operators could be opposed to helping MVNOs succeed. community and content than they are technology. when they are really wireless resellers. The MVNE offers third-party providers economies of scale. some MVNOs focus on the low end. entertainment and other industries. but usually do not enter into a wholesale agreement with a host MNO. These MVNOs tend to differentiate by brand and customer experience. So. On the other side are the high-end players looking at postpaid services involving data and content. Whether an MVNO business model is sensible and acceptable to the marketplace is no longer a question. so they cannot take on certain customer bases as a result. where voice is the primary product. They both need to support elements of the core network and service delivery platform infrastructure. Then there are instances where MVNO and MVNE overlap.9 MVNO & MVNE Some companies are mistakenly considering themselves as MVNOs. As a result their offerings need to be focused on specific audiences with a strong customer care component. The MVNE is emerging because most MNOs have systems and approaches optimized to serve the mass market. such as Virgin Mobile. This often makes it difficult for them to efficiently support third-party suppliers that address niche market segments with services that differ from the host MNO portfolio. but their networks still need minutes from somewhere else. those MVNOs that succeed will do so largely because their network operator partners have incentive to help them. but it's largely a brand play. where the MVNE is selling B2B. the credit challenged and those who dislike most operators' billing methods for minute overages. the large operators are actively chasing markets within their risk threshold. In fact.Providers supply components of the service delivery infrastructure to Resellers and Service Providers. The issue is. MVNOs are more about customers. The idea that a mobile phone can lead to a customer's wallet and loyalty has a range of companies interested in the opportunity. These companies tend to be largely prepaid.10 Why MVNOs make sense The mobile virtual network operator (MVNO) market is a crossroads for telecom. On the contrary. Financial markets are tough on operators if ARPU drops. some reasons why MVNOs make sense may be: • Many of the growth markets in mobile are riskier segments like the youth market.

• Building an MVNO will take an enormous amount of cash. non-telecom companies interested in MVNOs . o Third. Sprint's MVNO partner. o Second. o First. Partnerships forged with network operators. Affordable prices and straightforward tariffs structures are the cornerstone of all offerings. they will use content. All that cost is an undesirable burden to an MNO (specifically for targeting niche markets). • The MVNOs that prove successful seem likely to win for three primary reasons. encourage usage and brand loyalty. billing and customer interactions. in addition to platforms like television.• Another reason MVNOs make sense for operators is their focus on personalization. but promise to add minutes to their networks. as they had a brand and shared in the cost. but a growing number of subscribers want something more personal. to be spent on advertising. As an example. Focus on core services–products and services with well-established demand.like Virgin. Failure Examples - Success Examples MVNO Page 21 of 110 . customer care support and various kinds of software. nor will be so virtual they fail to maximize their customer relationships.all packages. in turn. and other media properties. and vice versa: Thus selection criteria must be devised by the MNO. • Key success factors for MVNOs The successful development of an MVNO requires the mastery of six key success factors: Possessing a strong brand and being able to transpose it to new markets Disposing of a wide distribution network adapted to the target customers Disposing of a known and addressable existing client basis Bringing to the market innovate offers in terms of price and/or content/services Being customer and service quality oriented Disposing of sufficient financial capacity to establish a long-term presence on the market Must create the right mix of products and services Support it with the correct infrastructure. wholesale network and content services. partnerships. • Another reason MVNOs make sense for operators is that they provide an opportunity to gain strength through relationships with larger. The large mobile operators generally offer one-size fits. ultimately. they will not underestimate billing and customer care. control data. allowed it to effectively de-risk entrance into the pre-paid youth market. These companies attract or bring with them more content. however at the same time is a key driver for the MVNO’s need to become known. to ensure MVNO-focused partnerships are complementary to their business in terms of distribution. successful MVNOs will target segmented audiences that don't threaten their network partners' retail businesses. radio and the Internet to create compelling communities of interest that will. their own brand loyalty and. The Walt Disney Co. Virgin Mobile USA LLC. more money to invest in building future mobile network and application infrastructure. Much of the market is satisfied with a generic plan. access customers. Multi-brand concept–tailored to suit the relevant target group.

Focus an offering for enterprises.Focus on a pan-European offering allowing for low-price calling while roaming abroad -. Some of the opportunities identified for potential MVNOs include: -.Focus on 3G and in particular data such as mobile music or mobile sports -. So: o There will be Convergence.12 The MVNO opportunity 2.11 Key driving factors enabling the MVNO opportunity • Western Europe mobile market is reaching saturation since: o in the Nordic countries are already saturated at 90% o the introduction of pre-paid subscriptions has had a large impact • Deregulation opens the mobile markets to competition as: o there is no need for own spectrum licenses or radio networks o there are Regulator-controlled interconnection prices • The focus in revenues is expected to shift from basic services to more content-based value-added services. While many of the MVNOs today are offering low-cost pricing (voice and SMS).2. evolution towards IP over everything o New entrants may have excellence in content-creation o Increasing shift from voice to data services is being observed 2. 3G will allow them to focus offerings equally on data.13 MVNO opportunities increase with 3G rollout 3G offers MVNOs an exciting opportunity to offer users a rich multimedia experience. that could potentially be broadened to include roaming as well MVNO Page 22 of 110 .Focus on offering convergence -. whether based on voice or data.

So the market for MVNOs opens up the space for established and new players such as billing and customer care companies to sell into. Most of the consulting groups predict a shift in the mobile value chain. handling financial transactions (m-commerce) and gaining a lot of new partners (for content. and there are also opportunities for IT companies and those that specialize in data. m-commerce. Entering the 3G area. 2. because alone. in UMTS 40% of the revenues will come out of the broadband wireless data services (portal and content applications). This in turn will allow MVNOs to personalize their data offerings. This will certainly provide the company with a competitive advantage and allow it to build its brand and raise awareness in the marketplace. Mobile Network Operators will have to face challenges like managing their new network (new technology). etc.14 The overall MVNO business context In 2G. MVNOs are the direct provider of services to their subscribers and not merely an entity that puts its content on the services offered by carriers. Billing and customer care is just one opportunity. To remain competitive. According to the most optimistic business cases. It also addresses opportunities for new companies looking to enter this space. Partnership with an MVNO is for them one of the most important success factor. Where Mobile Network Operators are generating about 90% of their revenues in GSM by selling network capabilities to their subscribers. their ROI period is not likely to be shorter than 7 years. which can increase usage and reduce churn. Traditional 2G Mobile Network Operators tend to keep end user ownership instead of opening their radio access network to MVNOs. Mobile Network Operators would face far more difficulties in mastering the UMTS challenge. As MVNO get ownership of their subscribers they act much more as a full service provider than a content provider. MVNOs represent definitively one of the best solutions to their concern. The insight Opportunities for MVNOs in Western Europe. advertising. MVNO Page 23 of 110 . Mobile Network Operators envisage therefore increasing their revenues and optimizing the usage of their network capacity by opening their network to MVNOs. Mobile Network Operators are facing pressure from financial institutes in order to reduce their ROI period. Due to the investment related to UMTS technology and the price of UMTS licenses in some European countries. analyzes developments in some key Western European countries and major companies. Therefore MVNOs with their respective background can optimally solve some of Mobile Network Operators challenges in the frame of a win-win agreement. That situation is changing with the introduction of broadband wireless services.For any new MVNO. it is important to focus on niche markets and get to market sooner rather than later. Mobile Network Operators have to offer innovative services and deploy them very rapidly on the market. As such the MVNO actively contributes to the business development of Mobile Network Operators (business complementary). network operators generate about 90% of the revenue by selling voice services and simple data services to their subscribers. media partners.).

anyone that can offer innovative services and appeal to different demographic sections to target niche sectors and tailor services should be attracted to this market.2. In particular. The MNOs: • usually have their roots in the fixed line business • leverage on the existing network and ownership of spectrum licenses The MVNOs: • can emerge from a plethora of industries • leverage on strong brands and extensive distribution networks ISPs Fixed network operators Media companies Internet companies MVNOs Retailers Automotive & M2M Niche & Communities Financial institutions MVNO Page 24 of 110 .15 MVNOs Backgrounds (Legacy and Next generation MVNO Models) MVNO backgrounds MVNOs are attractive to companies with strong brands. which usually have not been used previously in the cellular area.

Another pictorial way of seeing the MVNOs entrants’ background can be seen below. Fixed network operators Media companies Consumer Electronics MVNOs Retailers Automotive Financial institutions Therefore MVNOs in particular may arise from: o Traditional landline operators planning to add mobile services o Mobile operators planning to enter into international markets o Companies with strong brand names o Companies who could not obtain 3G licences o Companies from telecom. media and internet industries Legacy and Next Generation MVNOs MVNO Page 25 of 110 .

2. Many players from multiple industries are exploiting the MVNO model. mobile commerce and location-based services. ring tones. Three essential factors have emerged: 1. Helio a US MVNO now offers its customers GPS-enabled Google Maps. supporting MVNOs brings with it burdens and risks for the operators. to get revenues from the mobile market. 3. combining mobile and fixed line telephone services. While the initial business model of creating new revenue streams without actually having to be an expert in the wireless industry still stands. An MVNO usually offers not only voice services but also value-added services or sometimes referred as mobile value-added services. data. For example.17 Next generation MVNOs MVNO Page 26 of 110 . their offerings are not very different than traditional mobile operators. On paper MVNOs present operators with a way to realise revenue from spare capacity and target niche markets that are peripheral to their core business. mobile TV. 2. MVNOs must differentiate themselves with new value-added services orientated around customer choice and a personalised customer experience. broadband and TV. MVNOs need to execute effective mobile data strategies and create innovative ways to differentiate their services to high-margin multimedia. Convergence has become the new driving force behind the Next-Generation of MVNOs. multimedia messaging. Qualifying the business cases of potential MVNOs to a network provider can therefore be time-consuming and distracting 2. graphics and video information. For example. which are a combination of voice. As the voice ARPU declines. today’s MVNOs are far from achieving a license to print money. Examples include mobile music. location based and mobile commerce services. While many MVNOs have entered the mobile market on a “pure voice play”.16 Where is the MVNO today An explosion of the MVNO activity is taking place in the mobile marketplace. OTA music downloads and exclusive access to MySpace Mobile at no charge. Virgin Media is now offering a quadruple play package. games. However.

MVNO Next generation Concept The "Next generation MVNO" concept refers to the creation of a global network with Europe wide coverage. nor duplicate exact elements of the host MNO. except radio access. does not have infrastructure and act as host network resellers under their brand. based on completely different approaches: a transition away from price competition toward innovative and higher-value services. and centralized service platform. offer sophisticated voice and data services and differentiate on services. on opposite next generation MVNOs is going to have all GSM/UMTS network elements. These will therefore be unlicensed Radio Access & Transmission elements. MVNO Page 27 of 110 . nor will they be ad-hoc creations that require integration into the host MNO. consisting from all GSM/UMTS network elements. Note the fact that the MVNO model now goes beyond the Radio Access & Transmission element. innovations. this is to take into account the recent rise of convergence. except radio access. If initially MVNOs offer simple discounted prepaid voice and SMS services. The “Next generation MVNO” concept as evolution of existing first generation MVNO business model.MVNO Next generation preface Next Generation MVNOs in general do not necessarily invest in. not licensed spectrum. but instead they will all reside on a single platform that interfaces with the Host MNO and grows infrastructure around its individual customer needs and requirements in order to never become a potential burden to its host MNO. data offerings and customer care. connected by broadband network and binded with each countries incumbents through interconnection agreements.

and rising funds to expand globally. rich and diverse content and digital services. performing unified and centralized service platform.1 MVNOS Global Initiative Description The “MVNO Global” initiative is to create Pan-Europe global alternative GSM/UMTS mobile operator and service enabler using full infrastructure Mobile Virtual Network Operator (MVNO) concept. Also to introduce and complete consolidation by horizontal merger of existing MVNO’s. The industry players The target market is medium and high-end business and residential users.3. Since the “de jure” EU is single market. The global footprint of operator should cover EU25 countries and beyond. “MVNO Global” mission is to promote and be the part of Single European Information Space offering affordable and secure high bandwidth communications. MVNOs: Identities and Distribution 3. “MVNO Global” strategy is to be build in EU’s “Lisbon Strategy” framework which strives to turn the EU into the world's most dynamic and competitive economy till 2010. “de facto” we still have very defragmented mobile market with considerable roaming and global services(112 and in vehicle emergency call service) implementation problems. one from each country. other MVNO’s and service and content providers willing to start global operations on company’s technical platform. MVNO Page 28 of 110 .

List of countries involved in project depending from implementation time frame: MVNO Page 29 of 110 .MVNO Global footprint At first stage of project analysis of EU15 countries mobile markets will be performed in order to identify mobile market alternative key players and select those will be invited to negotiate aspects of fore coming merging process. Throughout second stage all separate networks and service offerings will be upgraded to developed standardized platform. In third stage other countries networks will be developed and connected.

lowering the costs of the company and increasing profit. MVNO Page 30 of 110 . thus reducing duplicate departments or operations. • This rationale is particularly alluring to existing MVNO’s and SP’s operating in tough mobile markets like Denmark. • The companies in addition benefit from synergy: better use of complementary resources. hence companies together are more valuable than separate companies. • The companies should come together to benefit from economies of scale. Finland and Sweden. centralized service platform and value of global brand name.Mobile internationalization EUROPE Next Gen MVNO Transition process Benefits for existing MVNOs (According to Global Initiative) To create shareholder value over and above that of the sum of the companies.

Each country’s GMSC is connected to other incumbent operators under terms of interconnection agreements.Technical platform • • • • • • FULL infrastructure MVNO model: GMSC. etc. HLR. Every GMSC should be connected to countries MNO: host mobile network operator. SIM cards Java toolkit. 3. Centralized customer care and billing applications. MMSC. In each country Global MVNO should have its own MNC and IMSI range. WAP. MVNO Global network topology MVNO Global network should consist from GMSC equipment in each country connected to each other by broadband connections. Centralized and unified LBS. OTA platform implementation. SMSC. as much it is technically possible in order to reduce CAPEX. Roaming agreements should be signed to rest of the worlds GSM networks.2 MVNO Global market share MVNO Page 31 of 110 . Service platform and applications should be centralized.

Israel.Planned MVNOs . with 63 million of those subscriptions coming from Western Europe. Ukraine (linked to Russia).41 MVNOs Australia. USA Rest of the World .0 Source: FirstPartner 2007 3. Malaysia. Japan. New Zealand. Réunion.4 Global MVNO Distribution North America . Hong Kong.63 MVNOs Canada.3 The Future of MVNOs in the 3G Era 2006 Market Map: European MVNO 3. Singapore. South Africa.3. Zanzibar . Taiwan. Dutch Antilles.53 (not regionalised) The global market for MVNOs will reach 150 million subscribers by 2013. Russia. MVNO Page 32 of 110 . This will result in MVNOs accounting for a 3% market share of the total mobile market by 2013.

5.5 MVNO Global Market Forecast (2006-2012) The global MVNO market from 2007 is likely to be impacted due to technological factors.3. shifting end-user demand trends and possible changes in the supply environment.1 The Customer Segments MVNO Page 33 of 110 . 3.

if they weren’t currently strapped for cash.2 The Revenue Model (an example) 3. Also.3 MVNO business Models The sort of companies most likely to become a virtual operator could be: .5.Companies with fixed network licences in several countries and its own international backbone. . All those fixed network operators that failed to win 3G licences then.3. this provides a basis to offer a common look and feel to their services. Building on this would enable such companies to offer a degree of mobility to their fixed network customers and reduce their cost base for calls made from and between countries in which they operate.5.Another likely profile would clearly be a well-known company wishing to capitalise on its brand name and with a strong customer base The most established business models are focusing on the support of services and customers MVNO Page 34 of 110 .

unlimited call tariffs & SMS bulk bundles SIM locking Difficulty in setting appropriate relationships with handset vendors Traditional MVNOs Rigid wholesale contracts Lean staffing structure Selected channels Simple products Very easy to understand tariff SAC lower than MNO Lower ARPU than MNO MVNO Page 35 of 110 . MNOs .Content / brand owners can enhance & extend the wireless market MVNO Risks Unfavourable wholesale agreement & restrictions Hostile pricing by MNOs .Less time to cash flow breakeven .Lower operating margin and capex vs.Source: FirstPartner MVNO Business Case .MNOs gain access to customers that are difficult to target .

Next Gen MVNOs Flexible wholesale contracts Dedicated customer care team Augmented distribution capacity Innovative content and service offerings Flexible tariff SAC similar to MNO Higher ARPU than MNO Fixed Telephony possible MVNO models MVNO Page 36 of 110 .

Source: AGCOM 2007 –MERRILL LYNCH 2007 ACCENTURE ANALYSIS (Nov. 2007) Fixed Operators are the only ones with experience in both voice and data services. while for the rest is another opportunity In MVNOs mature countries the ratio MVNO/MNO is approximately 5:7 MVNO Page 37 of 110 .

MVNOs distribution per country and market segment Europe presents different business models per country. Full MVNOs and Service Providers constitute approximately 69% of the total MVNOs number. 47m by 2009 UK: 5. Germany that has the higher MVNO penetration.For the above sample of European Countries (the most mature). 9% UK mobile revenue Source: FirstPartner MVNO Market Trends MVNO Page 38 of 110 . 13% of UK mobile users. full MVNOs possess 30% of the total.5m MVNO subscribers. the highest price reduction is observed (due to competition). Source: Accenture analysis (Nov 2007) MVNO Subscriber Forecast Western Europe: 13m subscribers in 2005.

etc).The MVNOs profit margins (by buying bulk) may aid financially both the MNOs network deployment investments (UMTS. Mobile Penetration in Europe and Greece Source: SATPE MVNO Page 39 of 110 . thus increasing their market share through the MVNOs (selling air-time in bulk). .MNOs may sell their network extra bandwidth.Source: FirstPartner MVNOs do not pose a treat MNOs . as well as cover the subscriber acquisition cost (SAC).

Sweden. Liechtenstein. Poland MVNOs in Europe have reached different maturity levels and are concentrated in northern Europe Source: Accenture analysis (Nov 2007) 3. Switzerland.6.1 Fixed telephony MVNOs in Europe MVNO Page 40 of 110 . Italy. Iceland. Denmark. The Netherlands. Finland. Luxembourg. Lithuania. Germany. Norway. Slovenia. Belgium.3.151 MVNOs Portugal. France.6 MVNO Adoption in Europe . Latvia. Spain. UK Austria. Greece. Estonia.

3 MVNOs in Europe: numerous initiatives. very few successes MVNO Page 41 of 110 .6.6.2 MVNO/MNO European Market share Source: Accenture analysis (Nov 2007) 3.3.

CALL LINE IDENTIFICATION RESTRICTION.Olympiakos . CALL DIVERT. 3.7 MVNO Adoption in Greece There are four Larger and a few small MVNOs.Coverage (the best in the country) .3. MMS.Frog .Small description The new prepaid mobile telephony offers very cheap rates. ROAMING MVNO Page 42 of 110 . MISSED CALL NOTIFICATION.Ciao (needs of an ethnic group) Powered by WIND -Q . EMERGENCY SERVICES. such as: • very low rates from the first second • very cheap SMS from the first message • very cheap MMS from the first message . CALL BARRING.Carrefour Frog Mobile . CALL LINE IDENTIFICATION.7.Services: SMS.MoMAD Some Smaller .AB mobile .1 The MVNOs in Greece 4 Larger Powered by Cosmote .

907 Vodafone 5. USA. SMS. Roaming.22 35.Services: Basic mobile services. Voice Portals. Roaming Q . MAD programme.412 82.920.835.Coverage (the best in the country) .000 256.050 Market Share (%) 53. Java Games.Ciao . Value Added Services.96 New Connections (Q2) 392.Small description This mobile offering targets certain ethnic group by providing: • Very cheap rates towards all mobile and fixed destinations in Greece • Cheaper rates for calls towards Greece.000 Wind 4. MMS. MO Portal.00 32.Services: Cheap bundle of voice and SMS towards mobiles of a certain foreign network.776 Hellas Total 17.683 Market Share (%) 40.Coverage (Country-wide coverage) . 3. Daily SMS.298.04 27.Small description The dynamic prepaid mobile telephony offers very cheap rates. MAD MMS news.7. who-called. Ringtones.11 Source: Companies Announcements MVNO Page 43 of 110 . MMS.638 731. SMS.2 Mobile Network Operators customer base (June 2008) Total Connections Cosmote 6. Music news.Coverage (Country-wide coverage) . such as • per second charging (from the first second) • very cheap national calls • Cheap rates towards 25 European destinations • very cheap SMS • very cheap MMS • no monthly fees . e-mail.Small description A pioneering prepaid offering targeting • Youth • music lovers offering unique services in the music and showbiz areas with • very cheap SMS • very cheap MMS .542.67 11.Services: Ring Me now. WAP. Happenings. music charts. MyQ services Mo-MAD . Roaming. Albania and Italy • Cheaper rates for calls towards CIAO numbers • very cheap SMS (same price for Greece and abroad) .

907 40.3 MVNO Figures MVNOs Cosmote FROG CIAO Vodafone OLYMPIAKOS CARREFOUR Wind Hellas Q MoMAD AB Σύνολο Low Cost Life Style Low Cost Community Low Cost 4.298.000 32.7.395 billion minutes and the customer base was 5.9 € AMOU 183 Minutes 144 Minutes * 125.683 27.000 4% 35.542 Million.3.000 17.7.96 5.000.04 3.776 1.835.4 MNOs ARPU and AMOU Cosmote Vodafone Wind Hellas ARPU 24.920.00 692.78 3% Low Cost Community MVNO Type Total Market Share on total Subscriptions subscriptions (%) 6.542.4 Minutes Data refers to Q1 of 2008 * Figure results from data provided by Vodafone for the period April-June 2008.2 € 22 € 19.2% 5. Source: Weekly Telecom Magazine (Companies Announcements) MVNO Page 44 of 110 . according to which the total traffic in this network was 2.000 519.000 0.

4. exploit factors such as a superior brand. therefore. according to their MVNO solutions: MVNO Page 45 of 110 . The model can be used by cellular operators seeking to expand their geographic reach as well as by brands which are sufficiently strong to leverage consumer loyalty across markets (e. but is not interested helping the MVNO differentiates itself. Given the importance of recouping high investment costs this is an increasingly important consideration.g. the UK supermarket chain Sainsbury’s has become an MVNO offering a branded cellular service to its customers). Host Operators have also generally proved poor at understanding what content will attract new subscribers. MVNO/ MNO/ MVNE Benefits and Drawbacks 4. MVNOs offer the possibility that traffic on their network will be increased as they offer capacity on a wholesale basis. there are three main categories of MVNEs. The concept also appeals to operators with fixed capacity as offering the opportunity to offer a combined fixed and cellular service with one tariff and one bill and discounted rates to customers who subscribe to both services. which could cannibalize host carrier customers. an MVNO could literally use the host mobile network for only radio and switching infrastructure. High "chum" rates (customers charging operators) is just one indication of a market where customers have little loyalty to their operator. Given the importance of such multimedia services to the future of the cellular market. An MVNO can. the MVNO is afforded the opportunity to customize its offerings arguably further than an MVNO that is totally reliant on the host mobile network operator. For the MNO For Host Operators. the host operator is satisfied to sell unused capacity. outsourcing everything else to the MVNE.. According to Pyramid Research. Everything considered equal. customer service functions or content to attract new customers who would not necessarily be attracted to the existing Host Operator. At the same time. branding and marketing expertise. MVNOs offer a way of addressing areas of the market which would not be reached by Host Operators as well as providing innovative services. For the MVNE The benefit that the MVNE can provide to the MVNO is deferral of capital expenditures and/or cost reductions while allowing the MVNO to focus on the customer relationships rather than operations.1 Advantages/ Benefits For the MVNO model Significantly reduced time-to-market for launching MVNO service Accelerated ROI and reduced TCO for both MVNO and Wireless Carriers launching a branded wireless service Faster time-to-market with new products and services Accelerated ability to launch new campaign and promotions Fast-track release process designed to accelerate time-to-market for enhancements Accelerated integration of additional partners and applications due to a highly flexible serviceoriented architecture Host Operators have traditionally struggled in understanding what their customers want. With an MVNE. using established companies as MVNO may be a profitable way of exploiting the knowledge of others.

The most significant problem is the basic conflict which Host Operators face. as a largely unregulated area of the market. and have complemented them with partnerships to provide end-to-end enablement services. . It is. For the MNO . data platforms and billing solutions. they choose to won more of their platforms.The greater degree to which the MVNO relies on the Host Operator for these services the lesser the possibility for service differentiation to diminish as the MVNO increasingly resembles the operator whose network it uses. distribution and customer care systems. The new breed high-end. operationally "light" MVNOs of today have generally worked with an aggregator MVNE that managed the limited back-end operations on behalf of the MVNO.2 Disadvantages/ Drawbacks For the MVNO model Despite the positive features outlined above. that by permitting access to their network they are permitting the creation of a competitor which will lead to a reduction in their subscriber base.• Aggregator MVNEs: these offer consulting and integration services and have bundled all of the back-office network components through alliances. .Costs of equipment are high and may make the project uneconomical given that volume discounts may not be available to new entrants.MVNOs. • Specialised Enablers: these offer only parts of the back-office network such as messaging platforms.MVNOs themselves face significant problems in constructing a coherent business case. . but they tend to opt for specialised ones with bestof-breed solutions and a strong reputation. • Aggregator MVNEs with their own platforms: this includes aggregators which have developed one or more back-office solutions internally. its core network. strong brand MVNO is transforming the dynamics of the MVNE market. They are not solely focused on the MVNO market. there are a number of recurring issues which have led many to conclude that this model has significant flaws. Besides leveraging their own existing assets. These promote their ability to quickly provide orderto-cash solutions to MVNOs. . . 4. They still work with MVNEs. The voice-centric. therefore. particularly their logistics. a critical prerequisite to success that the Host Operator is convinced that the selling power of the MVNO name can be used to increase the number of customers on the Host Operator’s network by attracting new subscribers that the Host Operator would not have been likely to attract or by churning customers away from other networks. . the Host Operator and any third-party content provider. .There is the fear that permitting MVNO "first mover" advantage in the provision of lucrative data services will mean the Host Operator will become a "dumb pipe" starved of these extra revenues.MVNOs must also develop intelligent billing systems which can accurately charge subscribers and also split complex financial transactions between the MVNO itself. will have all the benefits of being an operator without any balancing licensing obligations. Some have found that providing even a "virtual" network is prohibitive.There are also clear and understandable security concerns regarding giving an outsider access to the operator’s most important and expensive asset. MVNO Page 46 of 110 .

The MVNO feels that they are dependent on an external party .In case of disagreement in the future.For the MVNE . in-sourcing of operations by the MVNO may cost dearly Advantages and disadvantages of Discount MVNO revealed in the value chain MVNO Page 47 of 110 .

MVNO Page 48 of 110 . provisioning etc • However.4.2 MVNE Uses in Europe The degree to which an MVNO will outsource its operational activities depends on what its existing revenue streams are.2. making MNO/ MVNO integration more difficult o MVNO having to deal with many partners. US • In Europe MVNEs initially provided turnkey solutions o The “middlemen” -between MNO and MVNO– o Providing airtime as well as billing. application hosting.1 MVNE trends Europe vs.2. many companies have since adopted the MVNE solution o Resulting in fragmented market o Many MVNEs no longer have airtime agreements with the MNOs -MVNO left to organise this themselves o Only providing part of the solution. customer care. The MVNE solution appears very much to be ‘pick and mix’ with MVNOs being able to choose the different elements depending on their own in-house capabilities. MNO having to integrate with all of them! • The US the market is about MNO and MVNE relationships o MVNEs in the United States provide at a minimum the basic connectivity and infrastructure that allows an MVNO to launch a service o The MVNE lets the MVNO to concentrate on their core competency –marketing to a targeted customer segment o MVNE services range from the barebones cookie-cutter model to an elaborate menu of countless options • Less fragmentation = smoother integration o MNO retains control of network integration 4.

2. So regarding: Cost: Start-up expense should be limited so funding can be used for brand development–Incremental costs for capacity increases Quality: • Support systems should be scalable without lengthy delays to avoid service issues • Consistent user experience during the upgrade process should be available • Long-term high volume capability should be ensured MVNO Page 49 of 110 .3 MVNO-MVNE-MNO Functional Model MVNOs need to control back office costs without sacrificing quality.• Typically MVNE customers are brand owners with little or no telecoms experience • Wants to outsource rather than operate the MVNO in-house • The MNO deals with the MVNE. who in turn runs most of the MVNO operation • The key issue is the customer perception • Customer only sees the MVNO brand. not the operational workings behind the scenes 4.

with the MVNO model going through a number of iterations. by contrast. in both the MVNO and MVNE spaces. MVNEs will benefit of such an expansion. the future of the aggregator MVNE becomes somewhat doubtful. niche MVNOs. It is believed that most other MVNOs are at the loss-making to slightly above break-even level. If.4 Viability of Virtual Mobile Players Overview The mobile virtual network operator (MVNO) model has gained popularity over the past years. and churn. Virgin Mobile UK is profitable (more of an exception than a rule) but the company has been in operation since 1999. Available MVNO data certainly provides enough fodder to question the MVNO model. MVNOs have to improve one or more of the following wireless operating metrics in order to make money: CPGA (cost per gross acquisition). but is arguable whether this is enough to sustain the MVNO business model.Reference: 4.2. concerns about overcapacity and potential consolidation are emerging.wimax-industry. MVNO Page 50 of 110 . more ventures have followed in Virgin’s path (the model’s pioneer). Virgin-like players. at least in its initial iterations. MVNO service revenue has been expanding in line with the growth of virtual operator subscriber bases. ARPU. the MVNO space is dominated by a small number of large. The future of MVNEs The future of the aggregator MVNE hinges on the development of small. MVNOs financial attractiveness Based on an analysis by www.com it was found that the MVNO model is a lot less financially attractive than the hype would suggest. CCPU (cash cost per user). Today. If the MVNO segment moves towards a fragmented marketplace with dozens of players serving small niche segments.

as most mobile operators do today. and c) Companies originating from inside the ICT industry. Expander and Integrator respectively. Because of this. originates from.4. the brand identity type classification may look as follows: Follower 1) Frog Mobile as: o they are housed by an MNO (operational from the past) o Compete on price o They don’t have a competitive advantage o They don’t have a clear product differentiation MVNO Page 51 of 110 . sectors and parts of the market with just one brand. whilst minimising any association with the "follower" values.2. b) Companies originating from inside the traditional telecommunication industry. This is not compatible with trying to own all areas. like Virgin Mobile started as a challenger and are now becoming brand leaders.6 Brand identity in Mobile Services For a brand to have any value it must mean something to the customer and to do so it needs to be exclusive. Regarding the Greek MVNO market. but not as a telecommunication network operator. The three groups are called Retailer. 4. given that the companies are grouped into three types: a) Companies originating from outside the Information and Communication Technology (ICT) Industry. most mobile operators' brands are all over this matrix.5 Sustainability Sustainability of the MVNO business models will depend on where the company setting up the MVNO business.2. Note that successful MVNOs.

2. anyone that can offer innovative services and appeal to different demographic sections to target niche sectors and tailor services should be attracted to this market.o 2) Q Prepay o o Brand is not distinguishable from competition Lives on the legacy of Q-Telecom Competes on price or promotion 3) AB Prepay o Not premium competitive advantage o Not clearly defined customer base o Unclear product differentiation 4) Carrefour Prepay o Not premium competitive advantage o Not clearly defined customer base o Unclear product differentiation Challenger 1) Ciao mobile as: o targets a gap in the market (needs of a specific ethnic group) o strategy focused on customer needs 2) Mo-MAD o Targets a gap in the market (music funs mobile services needs) o Identifiable brand (MTV) o Well defined customer base 3) Olympiakos Prepay o Targets a gap in the market (football funs mobile services needs) o Identifiable brand (Olympiakos) o Well defined customer base 4. MVNO Page 52 of 110 . Some corporations already active in other areas of the telecoms sector are attracted to the model.7 Type of Companies attracted to the MVNO Model MVNOs are attractive to companies with strong brands. In particular. In the United Kingdom. some established fixed line and broadband network operators are using the concept to offer customers bundled cellular services. An example of this was seen in Sweden where the incumbent 2G operator Telia concluded an agreement in January 2001 with Swedish 3G Swedish licence holder Tele2 AB in order to access this new market. European cellular companies that were unsuccessful in acquiring 3G licences and require a pan-European network are attracted to the concept as a costeffective way of filling gaps in coverage. which usually have not been used previously in the cellular area.

9 VALUE TO MNO & MVNO .2.Agreements with GSM operators .MNO focus on its core branded offer Screen opportunities .Economies of scale .Outsourcing of MVNO business and technical operational management .Time-to-market .Field trial with light integration work for MNO .Innovation & differentiated services .Critical mass in expertise & skills .10 VALUE TO MVNO Operational MVNE Platform and team .Easy start .Risk reduction 4.4.8 VALUE TO MNO Complexity reduction .« Plug & play » interconnection .MVNO candidate education Refinement of project to adapt MNO objectives .Lower upfront and operating costs and investments Multi-country access MVNE positioning MVNO Page 53 of 110 .Mutualisation of investment between MVNOs customers .Distribution channels .Market segment .On the shelves technologies and services Financial advantages .2.Business development .2.Specific traffic usage .Differentiated services 4.

“MVNO” is a potentially confusing term.2.4. to offer leading edge services and to create and capture new markets. The growth in MVNOs has also created the opportunity for MVNEs. There are three emerging and commonly accepted operating models: the Reseller. the Service Operator and the Full MVNO. as it conventionally covers a range of different business approaches to providing mobile services.11 Different approaches to mobile services The Full MVNO model suits businesses that aim to engage fully in the telecommunications industry. MVNO Page 54 of 110 . as illustrated in Figure 1. to act as an interface between a Reseller or Service Operator and a host MNO.

• The Full MVNO suits players aiming to achieve additional differentiation from Service Operators and MNOs. business models. responsiveness and speed. and also achieve a high degree of independence at the outset. source. with campaign pricing to kick-start the take-up of services. an MVNO may want to introduce an innovative bundle of video call. both in terms of pricing and service innovation. but has little need to innovate in the services it provides or differentiate itself from other players. MVNO Page 55 of 110 . For example. Generally. the MVNO would have full control of services decisions. shown in Figure 2.Choosing the right approach The choice of MVNO operating model is complex. The benefits. pricing and promotion to the market. by differentiating themselves from other players in those segments through innovation in pricing or service content or both. Typically this means no-frills voice and messaging services. delivery models (for example hosted services) and the project’s timelines. This would mean implementing service offerings within the host MNOs infrastructure but with differentiated billing. This is because the control provided by the Full MVNO model may offer better short term and long term opportunities. by offering leading edge products and services. the Full MVNO model may be the best approach for some players who would otherwise select the Reseller or Service Operator models and introduce differentiating services into their offering at a later date. procure and implement the underlying solutions. Such projects can easily take more than a year. • However. the various MVNO operating models fit with the MVNO business models as follows: The Reseller model suits an organization that can leverage its existing distribution channels to sell mobile services. This means the Service Operator model suits players that seek to address specific customer segments. The Full MVNO would be in full control to ensure timely introduction of services. push-to-talk and other value added services. by adopting the Full MVNO model. need to be weighed against the issues of operator acceptance and infrastructure complexity. negating the clear advantage of flexibility. • The Service Operator model suits those organizations that wish to gain control over the services they provide. Acting as a Reseller or Service Operator would often mean persuading the host MNO to plan. However.

Another key advantage of the Full MVNO model for Resellers and Service Operators is the leverage they gain in negotiating wholesale rates. number portability management and regulatory requirements help to MVNO Page 56 of 110 . for an existing brand. and then managing it for growth.12 Execution & Fulfilment Launching an MVNO or MVNE involves many of the practices and processes required to implement any new business: business planning. assurance. interconnection management. the level of knowledge and experience within the telecommunications industry must also be considered. customer support. However.2. Full MVNOs are likely to play an increasingly important role in providing mobile services across several markets. 4. The Full MVNO may also reduce complexity in the MNOs wholesale interface.2. including billing. 4. that the products and services reflect the brand’s core values While service offering goes a long way towards determining the appropriate MVNO model and the required investment in infrastructure. a service provider can adapt to market changes and obtain a competitive edge. There is a gradual evolution towards the Full MVNO model by both existing and new third-party mobile service providers. through the additional wholesale volumes. Although this may be a potential barrier from the host MNOs perspective. This approach may also allow the host MNO to concentrate on developing its core brand value. it is balanced by significant advantages to the host MNO. there are a number of decisions and processes that are unique to the MVNO and MVNE. provisioning. Planning the service offering typically involves: Definition of the target market Selection of appropriate services and service charges for the target market Ensuring. This section provides an overview of these items.13 Business Planning Good planning is essential for an MVNO or MVNE. Issues such as service delivery and Quality of Service. service and delivery. in a way that a Reseller or Service Operator would not achieve. the gradual expansion towards a service oriented model focusing on service differentiation and segmentation is being driven by: Market saturation Increased end-user and network competition A focus on customer differentiation and customer loyalty 3G service opportunities and new wireless access technologies The separation of access and services Regulatory pressure The value of service bundles in strengthening competitiveness and dealing with competitive elements As a result. designing business and technology systems. without diluting it with multiple service offerings.As a Full MVNO. implementing the business. In addition to the advantages of the Full MVNO model already discussed. More customers may allow the host MNO to make more efficient use of its Radio Access Network (RAN). because the Full MVNO simply requires access to the RAN and handles all other service aspects. confirming the viability of the plan. Effective planning is built on a solid understanding of the commercial or consumer mobile telecommunications market and is essential to determine both the service offering and the appropriate operating model. because they own their customers and can switch networks.

estimate the potential market size for the offer. Technical Infrastructure The technical infrastructure must be identified. First describe each offer. management of the customer lifecycle. Streaming video. Targeted pricing plan steps 1.determine how much of the Full MVNO model should be adopted. out-sourced but owned by the business. Also conduct a sensitivity analysis of net life-time value (LTV) to different price points. Add justification for the offer by identifying a unique value proposition for the targeted segment. or locating a developer or designer to create bespoke content. including retail outlets. it is simply the incremental value of the offer. Instant Messaging. cannibalization levels. an MVNO or MVNE will need to manage customer facing logistics. sources for this content and download platforms must be found. 3. 2.2. Content services – Where end-user services involve content delivery. Email. sourcing existing content from a developer or content aggregator.15 Business Infrastructure The business infrastructure that any MVNO or MVNE will need to design includes: Host MNO selection – A host MNO must be located and contracts drawn up to cover commercial and technical aspects. Value added services – A service-focused MVNO will need to select service platforms and end-toend solutions for creating a differentiated portfolio of end-user services. It may also include systems to manage downloads and billing. Mobile phones – Suppliers of mobile phones will need to be found. its targeted segments. while net life-time value discounts the value lost due to cannibalization of existing plans. and retention gains. Ongoing management of this relationship is vital. handset provision and servicing. 4. Location Based Services. In the case of offers that are add-ons to existing plans. calculate gross and net subscriber life-time value. Next.14 Business Design Once the business plan has been validated and the go-ahead approved. the supporting business and technology systems can be designed and the detailed implementation can be created. Presence and more. 4. This may involve engineering existing content for mobile. 4. Gross life-time value should take into account only the value of the offer. At the end of this process the business should know what to offer customers and the infrastructure that is needed. including: Core network systems Service delivery platforms MVNO Page 57 of 110 . either direct from the manufacturer or using an established distributor. Mobile Blogging. as well as richer communications services such as Push-to-talk Over Cellular (PoC) / push-to-X.2. A Services portfolio may consist of SMS and MMS services. and the marketing of new services and offerings. it is prudent to make a decision about how the infrastructure will be managed. In addition. While these issues need to be considered by a prospective MVNO they are clearly fundamental for an MVNE. and list current competitive benchmarks from major carriers/competitors (both MNOs and MVNOs). entirely in-house. or purchased as a service from an MVNE. in-house but using a managed service. Mobile TV. Core business systems – As well as standard accounting and operational business systems. Finally.

interoperability. processes and procedures are required to monitor marketplace performance to ensure existing services remain competitive and new ones are developed. identifying and implementing new services for the target market • Service retirement. retiring old services and ensuring customer migration to new services Finding the right business partner can be the key to success for an MVNO or MVNE. interconnection and performance testing Data conversion from existing systems Delivery system content population Live deployment and switch-over 4. maintaining a fresh catalogue for content based services • New services definition and deployment.16 Production Support Production support includes day-today operational activities such as: Hardware maintenance. for service delivery platforms and core network infrastructure Managed Services. an implementation plan can be devised and executed. In addition. to ensure that the appropriate quality of service is being provided Load balancing and other activities to maintain quality of service and optimize use of the infrastructure. including both physical maintenance and repair. for full off-site hosted service of applications and infrastructure Convergent online charging. These activities might include: • Competitive analysis. as well as common support systems. such as a number portability platform. for business and technical planning. As a supplier to more than 600 mobile. The critical activities will include: Service specification and testing Interface development and testing Hardware and software procurement and installation Hardware and software integration System. Implementation Once the business and technical infrastructure has been defined. maintaining intelligence on market competitors • New technology analysis. maintaining intelligence on emerging technologies • New content acquisition. The key Nokia Siemens Networks products and services include: • • • • • • Mobile services.Customer relationship management Systems (CRM) Billing systems Customer care systems Network management These systems must be interfaced with the host MNOs infrastructure. flexible and pre-integrated solutions with advanced and rich connectivity to support interfaces to all networks for MNO and MVNO voice and data services Consulting services. for on-site management of infrastructure components Mobility Hosting. Nokia Siemens Networks’ world-leading experience in all areas of the mobile industry offers a low risk approach. Nokia Siemens Networks is in a unique position to offer support. billing and care. integration. fixed and hybrid customers in 150 countries.2. innovative and proven solutions for value added services Infrastructure hardware. legal interception. design and implementation Page 58 of 110 MVNO . as well as firmware and software maintenance Performance monitoring. interconnection with other networks and roaming arrangements. other networks and service operators.

and support it with the correct infrastructure. The ability to call on business and technical expertise from any discipline within the infrastructure domain helps to avoid roadblocks. coupled with familiarity with all the components within the MVNO/ MVNE operation. Ovum estimated in 2005 that by 2009 around 10% of all mobile subscribers could be served by an MVNO. a Full MVNO offers the greatest flexibility in going-to-market and then sustaining long term growth. • Build success through strong collaboration – Nokia Siemens Networks build long lasting collaboration with its customers and invests to ensure success for both parties.• Terminal. the Full MVNO operating model offers compelling advantages. any player must create the right mix of products and services. proven partners ease the operational challenges and provide quick deployment Remove complexity – Marketleading offerings and experience across mobile software platforms. In choosing an infrastructure partner. systems integration and solutions.2. the ability to terminate calls. billing. To be successful as an MVNO. 4. While many businesses will be served well by implementing Reseller and Service Operators MVNO models. allow Nokia Siemens Networks to ensure the delivery of optimum solutions • Reduce risk – Nokia Siemens Networks’ years of industry experience means much lower risk. an MVNO or MVNE needs to consider the depth and breadth of mobile telecommunications skills that their partner brings to the venture. MVNO Page 59 of 110 . device and mobile computing configuration management Nokia Siemens Networks’ experience in helping businesses deliver successful mobile products and services to consumers worldwide allows it to: • Enable fast time to market – Nokia Siemens Networks and its strong. the scope for MVNOs and MVNEs is increasing. and close control over the service. Low OPEX and CAPEX services improve the MVNO’s ability to properly manage its business case. regardless of the underlying service offering.17 Conclusion As traditional MNOs concentrate on optimizing their Radio Access Network usage and delivering mass market systems. With full ownership of the customer. with compound annual growth rates of between 8% and 20%. infrastructure.

19 - Host MNO Benefits Sell unused 3G network capacity through more than 1 MVNO Increase non-SMS Data ARPU Wholesale more profitable than retail customers if MVNO marketing more cost-efficient Enter All-over-IP market with zero risk for MNO brand and core Voice/SMS business Page 60 of 110 MVNO . MVNO models mean lower operational costs for mobile operators (billing. targeted segments. sales. marketing). product and segment needs – especially in new areas like 3G. The opportunity for mobile operators to take advantage of MVNOs generally outweighs the competitive threat 4.Future Outlook B u s i n e s s P o t e n ti a l - Value Seekers A2P2A is mass application Followers Value added services Powerful competing technologies Early Adopters Real-time processing Touch-point Integration 2004 2006 2008 2010 Reference: Mobile Economy 4.2. . customer service. An MVNO strategy can generate economies of scale for better network utilisation.Segmentation-Driven Strategies – mobile operators often find it difficult to succeed in all customer segments. MVNOs are a way to implement a more specific marketing mix.18 MNO Motivations (to host MVNOs) There are three primary motivations for mobile operators to allow MVNOs on their networks. help fight churn.Product-Driven Strategies – MVNOs can help mobile operators target customers with specialised service requirements and get to customer niches that mobile operators cannot get to. These are generally: . grow average revenue per user by providing new applications and tariff plans and also can help with difficult issues like how to deal with fixed-mobile convergence by allowing MVNOs to try out more experimental projects and applications.2.Network Utilisation-Driven Strategies – Many mobile operators have capacity. . whether alone or with partners and they can help attack specific.

2.40% Competitive data wholesale pricing Target GB retail pricing: 10-15 Euro MVNO/MVNE with HLR and own IMSI range in each country No upfront interconnection payment 4.2. MVNO Page 61 of 110 . VoIP – all applications. no packet filtering Revenue Sharing: MNO .2.20 - Host MNO Requirements Direct connectivity to OPEN MVNO/MVNE All-over-IP incl.60% : MVNO/MVNE .22 The MNO Perspective Reaching more segments. open ports. expanding share through non-traditional channels.21 Host MNO Wholesale Business Potential (Example) Even the biggest MNO in Germany could benefit from selling data capacity to OPEN or other MVNOs if customer churn (in and out) was proportional to market share 4. extracting attractive subscriber economics and stimulating mobile data take-up and usage are four major drivers behind the push by Mobile Network Operators (MNOs) to embrace MVNOs.- Inexpensive international data roaming for M(V)NO subs thanks to Multi-IMSI solution Preferred network for international OPEN visitors thanks to Multi-IMSI solution 4.

investors may also view MVNOs as complementing their other businesses by adding value to existing offers and leveraging existing assets. religion minorities. While retail generally guarantees a superior lifetime value. MVNOs can usually do a better job than MNOs in stimulating usage of mobile data because they can offer focused mobile data content and applications to target customer segments. teenagers.2. MVNOs may also provide MNOs with access to potential customers via non-traditional channels such as cable operators and alternative retail stores.23 The MVNO Perspective New growth opportunities. Third. in some cases the wholesale and retail subscriber lifetime values of segmented offers are not very different from each other. benefits to core businesses. unified messaging and home surveillance through a mobile device. Such segments do not receive much direct attention from MNOs’ typically mass-market product development. Finally. First. Cable providers have the potential to upsell the quadruple play with integrated services such as Wi-Fi coverage at home. university students) with a unique and targeted value proposition.g. Third. MVNO Page 62 of 110 . marketing and distribution strategies. Second. for some companies. As seen in Figure 1 (page 4). MVNOs’ utilization of non-traditional retail channels may contribute to attractive subscriber economics. applicability of existing relevant assets and attractive economics are among the factors encouraging private labels to consider MVNOs. services tailored to niche segments may hold the key to the still-elusive goal of making mobile data more “sticky” with consumers. 4.First. an MVNO that combines a clear target segment and focused offer with a unique value proposition can yield attractive subscriber economics. ethnic minorities. MVNOs are an opportunity to boost core businesses by stimulating brand loyalty and enabling cross-marketing for other products and services. the MNO runs a good chance of doing better with wholesale in the long-run. MVNOs provide operators with a means to directly reach out to specific segments (e. Finally. wireless continues to be a very strong growth business. if the MVNO partnership lets it acquire more net customers (after cannibalization) than it would have captured independently. Second.

Wholesale Value and MVNO Value for Different Customer Segments Sample HNO Evaluation Criteria for potential MVNOs: o Large own customer base o Strong distribution network o Strong market position o Low tariff intentions o Niche market segment o Economic strength o Mobile competence o International reciprocity o Georgaphic submarkets o Intial Public offering MVNO Page 63 of 110 .Example from the US MNO Retail vs.

4.2.24 MVNOs rationales There are 4 rationales for the launch of an MVNO offer 4.25 MVNOs positioning Different range of MVNO’s exist from the light offer provider to the full MVNO: MVNO Page 64 of 110 .2.

The enhanced service provider model is the most prevalent in Europe because it allows focusing on the product offering and the client relationship: Four main differentiation strategies have generally been adopted by European MVNOs: MVNO Page 65 of 110 .

Communication examples (2004) . MVNO Page 66 of 110 .MVNOs seldom lower their prices by more than 10 to 15% compared to MNOs. although some markets have fallen into aggressive price wars.Price/ minute comparison (2004) .Most MVNO communicate on low prices and value for money: .

operators are facing many challenges that can have a direct impact on profitability. MVNOs: maintaining market share through market segmentation where MNVO development is key. Considering the level of maturity in the region. In highly penetrated markets. Wireless Intelligence. consolidation in Western Europe is another topic that can also be expected to have an impact on revenue growth. Value Added Services: as voice revenues remain under pressure. Loyalty schemes: targeted promotions and loyalty programmes are playing an important role in managing churn and also in migrating users from prepay to contract. Partnerships with content providers. mobile advertising services and PC to mobile convergence can lead to fast adoption of VAS that will stimulate non-voice revenues. In addition. 2008) In this very competitive market environment. Rationalising the portfolio of voice and data services with such price competition has led to widespread large bundled deals. MVNO Page 67 of 110 . Amongst the key competitive factors that can stimulate revenues are: • • • • • • Prices: changing price elasticity can provide the right balance between volumes (voice and data) and price erosion as sudden price drops can lead to a drop in revenue. main operator groups can stimulate revenues by leveraging international economies of scale and synergies with their operations in other markets. including emerging markets.Evolution prepaid prices from the introduction of MVNOs Mobile operators' key challenges (Source: OECD. Quality of service: QOS is playing an important role in customer retention. data usage is showing strong organic growth and also acts as a key differentiator amongst operators. some operators have set up shared network ownership arrangements to reduce their cost structure. fixed-mobile substitution and innovative tariffs such as flat rates. Network coverage: expanding high-speed network coverage nationwide can accelerate the adoption of mobile broadband and other high-speed data services.

2.4.MVNO must display a light cost structure to deal with operators price per minutes MVNO Page 68 of 110 .26 Key challenges faced by MVNOs .

MVNO Page 69 of 110 .

5.3 MVNO market drivers • • • • Segmentation Regulations Competitive intensity Heavy 3G investments 5.4 MVNO market structure MVNO Page 70 of 110 . The MARKET structure & opportunities 5.

and close control over the service.5 Market size Ovum estimated in 2005 that by 2009 around 10% of all mobile subscribers could be served by an MVNO. 5. regardless of the underlying service offering.5. the Full MVNO operating model offers compelling advantages. While many businesses will be served well by implementing Reseller and Service Operators MVNO models. the ability to terminate calls.6 MVNE value 5. With full ownership of the customer. with compound annual growth rates of between 8% and 20%.7 Aggregation business model benefits MVNO Page 71 of 110 . a Full MVNO offers the greatest flexibility in going-to-market and then sustaining long term growth.

9 Competition is intensifying –mobile premiums decrease MVNO Page 72 of 110 .8 Key Requirements Deep understanding of the of MVNO market and MNOs concerns and strategy to gain trust Value added services delivering capability SIM Cards Voice mails Convergent services Mediation Billing (postpaid + Prepaid) + CRM Account management and marketing support capabilities Small MVNOs not always easy o deal with Small MVNOs need marketing supports 5.5.

MVNO Page 73 of 110 .

10 Local scale is key to achieving EBITDA margin ambitions 5.11 Operators need to adjust MVNO Page 74 of 110 .5.

planes etc. we have the following: Three possible models Low cost garage provider Co-branding with well-known product in any line of business (i. text and content to their subscribers.12 The challenger strategy must be tailored to the market environment 5.13 Marketing strategies Discount or Low-Cost MVNOs: provide cut-price call rates to market segments. Clothes. cars.e. Advertising-funded MVNOs like Blyk or MOSH Mobile build revenues from advertising to give a set amount of free voice. Community MVNOs like Turkuaz-Mobile in Germany.) Economies of scale – born global strategy: • Multiple countries • High end technical solution • Best quality product from day one What is the company’s risk profile? Low risk: Low cost provider (low investment) MVNO Page 75 of 110 . Ay Yildiz in Holland or CIAO in Greece One specific sector of MVNO operations focuses on international.5. These are distinct from domestic MVNO agreements and are intended to provide transparency of international tariffs Looking at the Market Strategies from a different view. Lifestyle MVNOs: like Helio focus on specific niche market demographics. or roaming Mobile Virtual Network Operators (rMVNO).

14 Timing The market for online is a slow moving thing Crossing the chasm paradigm Innovators and early adaptors Belgium is only just starting Regulation is in place Customers are getting used to online No or low churn PRICE is important and then easy to use and simplicity Offline distribution cases show that the majority sticks to what is familiar DK shows that it will change over time MVNO Page 76 of 110 .Medium low: Average IT solution without co-branding Medium high: Average IT solution with co-branding High: Born Global without co-branding WEB self-service is the Key Using 100% self service platform integrated with the operator Has all MVNO needed functions and processes for GSM User friendly Standard platform that is further developed 5.

MVNO Page 77 of 110 .15 Provider Selection criteria 5.5. For instance.16 MVNO Services For now MVNO services have been limited. but analysts from EMC Research have predicted that as wireless services grow. One MVNO could provide sports news. in the future a cell phone user may be able to subscribe to a network operator plus multiple MVNOs for specific data services over the same phone. so will the availability of niche MVNO applications. another weather and traffic and still another could provide instant messaging capabilities.

each MVNO and the network operator could focus on their own niche markets and form customized detailed services that would expand their customer reach and brand."International Calls &roaming" MVNOs Ethnic MVNO propositions According to research of Piran Partners. Therefore.Internet Based Virtual Operators . this market segment is represented by Lebara. Chippie. In Holland. Ethnic minorities represent a source of new. high quality mobile phone customers. Piran Partners has compared these propositions to other MVNO propositions and reveals that these MVNOs are on average more profitable and deliver quicker results. Ortel and Ay Yildiz. European Ethnic Migrant Population (There are 32 Million people in Diaspora in Europe) Reference: Lycatel Mobile MVNO Page 78 of 110 . more and more MVNO's develop propositions focussing on this segment.MVNE based MVNOs .In this way.Virtual Operators . IDT. Lyca. much needed in a market so characterised by churn. Voice Messaging Data Calls Voice Mail International Calls Billing Refills/credit Usually free or next to nothing for on net/ flat rate off-net nationally Very cheap on-net/ Follow the competition for off-net Cheaper than MNOs Cheaper than MNOs Cheaper to certain targeted destinations National Calls: Per second International Calls and Roaming: per minute Availability of a variety of refill cards is a must Provider Types in Europe The types of providers in Europe can be: .

Applications supported by M2M MVNO’s are many and varied including telemetry. branding. some times referred to as Machine-to-Machine or “M2M” MVNO’s facilitate communications between various machines with the help of a wireless network. MVNO Page 79 of 110 . a US based MVNO. allows companies a white-label concept whereby companies can launch their own-branded mobile phone service. Sonopia will rent network space from Verizon Wireless and give the client companies mobile phones. we believe that Data MVNO’s will evolve from a successful niche business into a booming opportunity for vendors and service providers alike. In a world of expanded M2M communications.Companies to allow MVNO set up (by Sonopia) Sonopia. and or a particular important niche. and more. billing. remote asset management. DATA MVNOs. and Web sites for their new subscribers. Sonopia claims that customers can set up a new mobile service in roughly 15 minutes. monitoring. It is almost universally agreed that successful MVNO’s will have some combination of scale.

2 Key Issues MVNO players are faced with • • • • • Is the MVNO market sustainable? Is FMC a long-term driver of the MVNO business . a potential MVNO (which usually lacks mobile expertise) has a major challenge in designing the right entry strategy. By bundling media content together with voice and data traffic. but it is also the most risky as it has yet to be proven on a large scale. There is a feeling among many media companies that the large revenue percentage taken by MNOs is unjustified.will FMC players develop or acquire their own cellular infrastructure and what are the pros and cons of the respective approaches within the MVNO environment? Where are the next potential growth markets for MVNO growth? What are the most developed MVNO markets and which will be in the future? What MVNO approaches are sustainable long-term? Page 80 of 110 MVNO . ADSL) while most mobile operators sell content over their networks over the last years. They have however viewed cautiously by many operators that see potential competition with a strong brand-based offering. In some cases. particularly from the more aggressive media organizations (e. the content services may not even be owned by the media company that starts the MVNO. Typically these services (e. A very feasible MVNO can fail due to an undifferentiated market entry strategy or poor launch execution. Some of these companies would like to move up their value chain by creating their own web portals and a few are now being set up by their own MVNOs. Rupert Murdoch’s empire). photos.Bundle together premium content or other services Of the three strategies mentioned above.g. The last strategy above for setting up a successful MVNO is the one that bundles together mobile with other services. the market segment for any of the options of strategy has to be selected very carefully.6. even with a strong business case. a media MVNO can avoid price competition and gain significant customer loyalty without the need for extensive marketing of the products. music. and developing and executing the launch plan.g.1 Setting-up Strategies Three strategies exist to setting up an MVNO: . Also most of the bundling experiments in telecom world have been realized for media companies destined primarily for wired/fixed Internet communication channels (e. 6. MVNO BUSINESS SETUP The process starts with developing a strong business case and negotiating a viable wholesale agreement. bundling is probably the most attractive to many businesses.g.Establish a price-winning formula . 6. video. however the bundling option seems to present significant importance.Build on a well known brand . etc) can be consumed on a mobile device but there could also be other telecom services such as fixed-line calls or Internet access. as well. Finally. However. It is always dependent on the type of implementation.

community orientated and many more Device and component manufacturers • • • Understand the MVNO business proposition from the service provider perspective Identify key players and scope for partnerships Recognise evolving roles and opportunities in the MVNO service provisioning value chain Vendors • • • Understand the MVNE value proposition and platform/software providers role within it Identify opportunities for service provisioning and support Formulate service provisioning strategies for clients based on best-case approaches Consultants. retailers. reasoned hard facts free from industry hype Provide clients with clear business intelligence to support recommendations and investment Page 81 of 110 MVNO . analysts and venture capitalists • • Provides unbiased. niche. content providers and many more Evaluate specific business approaches. including discount. business.3 Issues per player Operators • • • Evaluate and quantify opportunities in various strategic roles from service provider and partner to competitor Identify threats and ramifications of current market developments and understand their wider strategic impact Anticipate market as it moves forward and formulate strategies to tackle it Potential MVNOs • • • • Evaluate the opportunities and challenges Analyse potential strategic approaches to implementation Assess business models of specific industries including. business service providers.• • • • • • • • • How does an MVNO go about successfully launching in this evolving and challenging market? What type of approach is most likely to succeed and what are the strategies to ensure their success? Is the MVNO market sustainable? Is FMC a long-term driver of the MVNO business . 3G only.will FMC players develop or acquire their own cellular infrastructure and what are the pros and cons of the respective approaches within the MVNO environment? Where are the next potential growth markets for MVNO growth? What are the most developed MVNO markets and which will be in the future? What MVNO approaches are sustainable long-term? How does an MVNO go about successfully launching in this evolving and challenging market? What type of approach is most likely to succeed and what are the strategies to ensure their success? 6. brand owners.

The MVNO profitability calculations will help benchmarking the MNO performance against MVNOs. Finally. and ARPU) will help financial institutions to benchmark such data against existing cases. profitability. The MVNO profitability calculations (NPV. determination whether MVNEs will strengthen the MVNO service and increase their profit (could be based on external analysis). MVNEs: Need to understand the long-term market potential and MVNO perception of MVNEs.5 Business Case Structure The traditional values of brand. It also demands cross-industry partnerships and new business models.6. accompanied by a re-organization of the value chain. since the benefits of mobile data services may vary greatly by applications area and segment. will help. CCPU.4 Targets per player Mobile operators: To quantify the long-term revenue potential of the wholesale market to support decisions whether or not to work with MVNOs and MVNEs. MVNO Page 82 of 110 . quantify the long-term equipment and service opportunity in the MVNO space based on revenue. Finally assessing of key competitors and benchmarking of the MVNE positioning against them. MVNOs: Need to develop a strategy using external help (a consulting firm) with objective long-term analysis of the MVNO market. The mobile market is changing from an environment dominated by voice to one where mobile data services are equally as important. is needed. and if there is an opportunity beyond application hosting. and subscriber forecasts. Also benchmarking of costs and profitability against industry averages and other key players is definitely required. specific expertise). Also determination of an optimal strategy to attract MVNOs (end-to-end solutions vs. Vendors: Must assess the MVNE opportunity for a long-term strategic entry (partnerships or acquisitions). Financial institutions: Need to assess the viability of MVNOs and MVNEs to support a decision on whether to finance MVNOs and MVNEs. 6. CPGA. functionality and quality will be more important for the MVNO than any mobile technology. Finally. This is worth bearing in mind. This is not an easy transition. as it requires adaptation to new services concepts and new technologies. Also determine if MVNEs are competitors or complementary.

Each of these steps is linked with potential obstacles and partnership dependencies that could derail an MVNO’s launch plans. setting up an MVNO is a daunting task. possesses entry barriers and launch risks that are high enough to discourage most outsiders from making the plunge alone.6. The final steps are brand and channel development. Next steps include the selection and integration of back-office systems and processes. As seen in the figure below.7 The MVNO Business: High Entry Barriers and Risks Despite the attractiveness of wireless.1 Barriers Lack of wireless skills and expertise. including custom mobile content and user interfaces. from network leasing to channel development. and the selection of handsets. economies of scale and high peak funding are among the major barriers to entry faced by potential MVNOs. follow. and the selection and integration of mobile data platforms. The wireless business. which increase in number and complexity as one moves up the different steps of the wireless service delivery chain.7. 6. Prospective MVNOs often have little MVNO Page 83 of 110 .6 MVNO Business Guide Few key questions for the business case include: What are the effects or different pricing schemes? Which mobile data services take more capacity? What are the effects of revenues share arrangements? Which mobile data services have the highest contribution? How mobile data services and price plans complement each other? How mobile data services and price plans capture from each other? MVNOs who can proactively address thre questions and manage their revenues and investments in key functional areas will be successful in this competitive market place. They will also maximize their return on investment and share holder value. 6. though potentially lucrative. Design of an offer. an MVNO requires a network leasing agreement with one or more MNOs. MVNOs must manage a wide array of responsibilities and relationships.

as well as content providers and handset OEMs to profitably deliver a differentiated value proposition to their target segments.relevant experience to guide them through the different steps of the wireless service delivery chain. If the MVNO can demonstrate strategic value to the MNO partner. These costs can delay an MVNO’s EBITDA breakeven and require considerable investment (in the range of millions) in peak funding. The first class of risks belongs to the selection of the appropriate partners. the MVNO can extract a more favorable deal that is not just based on volume of subscribers. Launch can be preceded by six to nine months of start-up costs. including risks associated with the selection of partners. and post-launch subscriber acquisition costs range from € 65 for a low-end pre-paid offer to over €360 for a high-end post-paid service (based on MNOs current CAC –Customer Acquisition Cost). Even MVNOs that successfully combine internal resources and partnerships to navigate these challenges and risks will still be disadvantaged to existing players due to economies of scale. MVNOs need to partner with individual backoffice systems/process providers. most MVNOs will face a few years in the red before they can break even.7. 6. MVNOs must identify and form relationships with the relevant distribution partners MVNO Page 84 of 110 . Finally. and risks related to the execution of the launch. MVNOs need scale to negotiate favourable pricing terms on network leases with MNOs and handset contracts with OEMs. and the negotiation of partnership terms and conditions. An MVNO’s long-term prospects depend largely on whether the selected MNO places strategic and not only financial value in the MVNO’s target segments and proposed offer.2 Launch Risks Potential MVNOs also face a number of launch risks. In addition. Once in the business. MVNEs and mobile data platform providers.

MVNOs that fail to exhibit a strong execution and program management discipline in the launch phase could end up suffering from long delays or developing a value proposition that is not differentiated enough to attract customers in their target segments. An open relationship with clean demarcations is critical. Execution of launch opens the field for a second class of risks. 6. Naturally. MVNOs managing their launch programs have to execute. NextGeneration MVNOs have certainly got the potential to cause even more excitement than they already do. Managed carefully and integrated successfully. Outsourcing the complex business of billing and customer care for converged services to an MVNE creates real flexibility for the MVNO.in order to cost-effectively reach their target segments. experience and systems are of little good unless the MVNE has worked out how to share risks and responsibilities with its MVNO client and the other third parties involved. The criteria for success in this MVNE field obviously must include assured capabilities in running a network service business. the role of the MVNE will grow. keep track of and monitor progress and risks of hundreds of interdependent milestones cross each level of the wireless service delivery chain. Indeed the very best MVNEs are those that have given their MVNO clients the opportunity to fine tune their service portfolio and be most responsive to changing market conditions or new technologies. however close collaboration between all players is absolutely essential to success. As these proliferate and seek competitive advantage. as well as brands evaluating the MVNO model. quite often requiring the support of an MVNE. Specialist skills. coordinate.8 The future of MVNOs MVNEs are increasingly relieving the pressure that MVNOs continue to experience as they seek to enter markets quickly and effectively. This already includes network providers and the branded service businesses that have a direct relationship with a customer. there is a rush of businesses positioning themselves as MVNEs. MVNO Page 85 of 110 . MVNEs are becoming an integral part of a maturing converged communications industry.

the GSM Association. Mobile is never to be underestimated. The whole point of wholesale is the resale of excess capacity. with an MVNO you need a small group of people who understand the whole process and service. This would help to ensure a more efficient use of the spectrum but some incumbent providers argue that the market is already competitive and intervention is not necessary. is cautious about regulation surrounding the MVNO model. not all. which represents more than 500 GSM operators and key mobile vendors around the world. and the host MNO cannot support the MVNO delegating this to its staff. second and third line support on behalf of the manufacturer. Those who fall quickest into this trap are existing fixed or other operators.9 Implementing an MVNO Understanding the MVNO The MVNO is a business. in that and MNO or MVNO owns and/or manages the very complex and expensive customer equipment (handset and SIM). At the same time. To successfully pull of an MVNO you need to keep costs to a minimum. the model should bring value to both parties and be mutually profitable. as the MVNO model cannot support delegation to masses of employees. an MNO can cut prices or launch a budget service whenever it likes. to create extra capacity is to completely misunderstand the underlying concepts of Virtual and Wholesale model. they are his lawful prey. This is obviously a finite market and one which could fin itself in serious problems if and when the operators engage in a price war. It is also far different from running an MNO. Wholesale mobile is vastly more complex than wholesale DSL. and to completely underestimate the complexity. expense and overheads required of running a mobile network. which means having staff that understand the whole end-to-end process of delivering a mobile service and a call. specifically to provide input on whether government intervention is necessary to allow MVNOs to offer services and applications at a lower price to consumers. and the MVNO requires a very different skill set than managing a fixed network. It is keen to see legislation that helps companies provide and take advantage of the financial potential of MVNOs. passwords and the process of the user being able to use anyone else's wireless modem router in the same way as they do at their own home or office. For instance. fixed or other telecoms models running an MVNO is also vastly different from running an MNO. but also the first.6. which paves the way for someone else prepared to offer an even worse service even cheaper. where you are only generally responsible for part of the end-user process. There are arguments from both sides as to whether the MVNO model will bring otherwise unreachable revenue or unwelcome competition to the MNOs. not a network. Selling on cost also only acquires a customer with cost as the only value. and should never be driven by the network. Mvno and the regulator So far MVNOs have not been regulated in any country. Finally. as well as the authentication. now seems to be the "low-cost MVNO". in the DSL world this would be the equivalent of the DSL provider not only providing a DSL line and a wireless modem/router. A follow-on to the buzz-word "Brand MVNO" loved by those who aimlessly follow trends from the back-seat. The only way a low-cost MVNO can offer value to an MNO is if the MVNO takes customers that are so low value that only the MVNO running a much leaner business model could make money from them. Mobile and therefore MVNO is vastly different from other wholesale and even other telecoms models. The ITU has received several requests to study the issue. but it is equally keen that network operators should not be legally required to open their networks to anyone wanting access. some UMTS MVNO Page 86 of 110 . The low-cost MVNO does not offer the host operator any value. this brings us on to the most important fact of understanding wholesale and the MVNO. and as Ruskin said.

The universally held view on regulation of the MVNO is that it should be defined by commercial agreements and not regulatory intervention. and all mobile telephony players. benefiting subscriber productivity and increasing the health of the industry. the MVNO market is still closed in several European countries In other countries. and most certainly a competitor of the other MNOs it did not reach a commercial agreement with. based on the latest technology . are fighting the regulatory authorities for the right to share their spectrum. encourage innovation of new services. In the long term. Regulation for opening the market to competition through full infrastructure MVNOs will definitively reduce roaming and long distance tariffs and. It goes without saying that the MVNO requires regulatory assistance and support from these MNOs and indeed even other MVNOs. This is very unwise. gateways.Low costs guaranteed through global carrier agreements Thus international calls should be switched to international destinations via the optimal route Core Network Elements The core network should typically be made up of the following components: . having the right to freely move goods and services and even set-up in other EC Member States. at the same time. like any other business within one EC member state. as whilst the MVNO may reach a mutually beneficial commercial agreement with one MNO. To boot. it will slow innovation and decrease the health and longevity of the mobile market. in the short term.High quality connections maintained by the routing and switching teams (own or the MNO’s) .Secure routers. push prices down. particularly in Germany. Such regulation only focuses on prices and carriers. These services include: advanced roaming solutions that will drive roaming costs down The Full MVNO can establish its own roaming agreements and this enhancement will be translated to consumers Global MVNOs can even leverage their footprint and create multiple MVNO agreements in multiple countries - Effect on Consumers and the Way Forward: Regulation on international roaming tariffs will. Additionally there is the issue in the EC of an MVNO in one member state. beyond reaching commercial agreements with a host operator in each member state. Whilst this is wise on the one hand. it is still essentially or potentially even a competitor with it. tunnels & IP networks .International gateway.. there are still large.Intelligent networking ensuring reliability & quality MVNO Page 87 of 110 .licence-holders.. service innovation. carriers accept MVNOs but restrict that agreement to Reseller MVNOs. on the other it has also been an excuse for some regulators to wipe their hands of the MVNO and any regulatory issues it may have. practical barriers to this that need addressing and regulatory support. this MVNO will almost certainly have shared important commercial and strategic information with these competing MNOs before reaching an agreement with its chosen host MNO.24 x 7 monitoring helps ensure reliability . not the full MVNO model Full MVNOs have the ability to create services and innovate because they own certain core network nodes such as the GMSC and HLR. Traffic Management International traffic should be managed to ensure that customers get the best possible combination of quality and service: . however. this strategy will benefit all consumers and players in the market. It is obligatory to consider the processes affecting pricing.Several carriers interconnects (to choose from) .

should mean more to customers than just making calls. MVNO and the brand A commonly held misconception of the MVNO is that it was all about the brand. as there are many ways to differentiate a service via the SIM. Regarding Services. and the obvious conflicts that arise form the situations that mobile operators form 99+% of these companies' business. differentiated services on the same platform and even the same phone. MVNO and the handset The handset and the SIM are the key to the success of mobile and are therefore key to the success of the MVNO. It is very important for customers to stay in touch & that’s why brand values such as those listed are important in everything an MVNO does: . This is an often overlooked element of the MVNO that the MVNO will often try to neglect in preference to just taking the MNO SIM and rebranding it. This is not necessarily wise. Since then the market has moved on.Always give customers value for money . Some of these include Telematics.Always be empathetic to the needs of diverse communities MVNO Page 88 of 110 . This can all be done remotely with IMS or even SIM applications.Give customers the convenience of direct-dial international mobile calling . and most importantly allows customers to move between these differentiated services. a school or university phone to also form the basis of another MVNO targeting the "parent phone" or be passed on to become the "parent" phone or even follow the customer to become a "work" or "lifestyle" phone. Mvno and IMS IMS allows an MVNO or even MVNE to provide multiple. mainly as the market is no longer dominated to such an extent by those manufacturers who also had a core business in mobile operator infrastructure and maintenance. more open operating systems. machine to machine (M2M) and even the vertical telecoms data and voice MVNOs that will shape the market in coming years. Apart from not being true.Make products easy-to-use & prices easy to understand .Make sure all relationships are built on trust . This model allows the same phone but a different service to be provided on the same infrastructure.- 24x7 Network Operations Centre Mvno and the SIM The SIM is the single most important part of the ownership of the customer. The handset is becoming less and less the huge thorn in the side that it used to be. this concept was heavily promoted both by Mobile Network Operators of the reluctant variety. The SIM buying model of the host MNO is often dictated by different parameters like and driven by issues such as volume and even the fluctuating and expensive nature of silicon at the time most MNOs set-up. This would allow.Ensure all connections are of great quality . maybe in order to discourage the evolution of the MVNO. with Java SIMS and Java toolkits being much more suitable and flexible for the MVNO and even cards with embedded flash memory on the horizon. more intelligent handsets and finally the rise of ODM and OEM handsets that will soon mean an MVNO can potentially design and launch its own handset from a reference design. Mvno and FMC Fixed-mobile convergence opens up the MVNO market to the numerous potential MVNO models that emerged previously but never reached their potential. things are changing with more competition. However. for example.

the implementation of the NRTRDE solution. dispute handling sometimes may be unclear. credit checking may not be strong enough The above reasons may in turn bring about certain Implications for both the MVNO as well as for the host operator: The subscribers are indirectly MNO subscribers Less revenue for the MVNO means less revenue for the MNO also Depending on the collaboration agreement. there are few or no people dedicated to fraud and revenue assurance The MVNO may try risky business cases/ scenarios. with the risk of MNO losing the MVNO Solutions and recommendations (For Fraud) Regarding domestic fraud. while the expected revenues most of the times are limited In the case of the MVNO being engaged in post-paid market. again for economical reasons. such as: • CDRs available more frequently • Possibility to shut down a line on a 24x7 basis • Fraud Management System tailored to the MVNOs needs • Fraud Management reports Regarding Roaming fraud (case where MVNO core business is offering the roaming service). its implementation is expensive (300K €) MVNO Page 89 of 110 . via which: • Send NRTRDE files to MVNOs (IMSI splitting feature) • IMSI provisioning • File Splitting and naming of new files created • Distribution of file to respective Service Provider • Reporting on splitting activity • Fraud Management System tailored to the MVNOs needs • Suspicious Dialed Digits (SDD) • Pattern Matching • Suspect Equipment • High Usage • Premium Rate Service • Mobile Data Evaluation Note: However NRTRDE is mandatory for MNOs.MVNO fraud exposure MVNOs are more vulnerable than an MNO towards fraud since: Due to limited head count (at least initially for cost-cutting reasons). a number of actions can be taken to counter this problem.

own number space or part of MNO space SIM card production / logistics. e. site set-up. both MVNO and HNO side. Reporting issues Software programs and their administration MVNO service package (basic / options) MVNO activation / set-up project All relevant items in the contract to be executed.10 Modeling MVNOs: The Big Picture Areas to be dealt with are: Contract management Following issues are to be covered in the contract management phase: Numbers. SIM card logistics Support.g. Customer Care / CRM MVNO life-cycle management Changes and modifications in MVNO portfolio Agreement updates / extensions / phase-out MVNO deregistration / transfer of customer base MVNO Page 90 of 110 . Systems. Invoicing. Sales and technical support Sales Outlets. location and interfaces Billing.6. how to be arranged Network Infrastructure. deployment.

In this bill run the final rating of CDRs must be performed. request/track status of SIM swap. Customer Care Customer care features. every CDR is pre-rated (to enable fraud detection). Such features may include: • • • • • • • ticketing & progress management. sales management & order tracking. Rating & Billing Mediation: is performed to create a general CDR format from different formats (for instance fixed and mobile). After a bill is generated. Self Care The Self Care function (automated customer service) may decrease the amount of calls on the customer care department. should be easily integrated in existing call center environments. Using such features the MVNO Customer Care environment. detailed customer information including CDRs. it should be send in regular paper format or by e-mail. Billing After rating an invoice can be generated. Such a function is usually easily integrated with existing websites and could offer services such as the following: • • • • • change personal details / moving. is enabled to perform their own customer care services (outsourcing of these services is always a possibility). If all CDRs pass the exception rules. as they enable MVNOs to make modifications to rate plans within short timelines. So provisioning arranges the link between the telephone number to a SIM (IMSI) and the activation of this combination on the network (IN/HLR). they should be stored as non-rated and formatted until a bill-run is performed. task management. finance management. a credit check must be integrated into the activation process. case & queue management. Mediation. Rating is based on the rate plan. For postpaid propositions. vew/download invoices. Rating: is performed in different steps. enabling flexible propositions to the market. customer automated e-mail interaction. First.Provisioning The provisioning module is one of the key areas that enables activation of users on the network and management of network settings. upgrade/change contract. request/track status of number porting. Mediation. the subscriber bundles and the discount models. SIMs can be activated realtime or through customer care. Provisioning should allow users to change certain important service settings. using several threaded parallel bill cycles. Page 91 of 110 MVNO . rating & billing is an important process.

handsets etc need to be transferred from the warehouse to the end-customer and in some cases needs to be installed on-site (fixed). Direct Debit. Fraud Detection The basic fraud detection has to do with high usage. In the online shop not only physical products should be offered. self care. customer care and can be seamlessly integrated with existing websites. Each area has its own data and service responsibilities. e-commerce and fraud detection. The shop can thus be integrated with distribution. BSS and OSS (operational support systems) platforms are linked in the need to support various end to end services. Pay-Pal. but also service products (for instance a paper bill). In this way. MVNO. etc. The possibility to fully integrate the distribution of products in the BSS* environment should be investigated.• • change services. Products like SIMs. Additionally via interfaces: to the OSS system that can trigger events (for instance e-mail) or to BSS reps in case of a fraud event. which could be paid using Credit card payments. When usage amounts of postpaid customers exceed a specific level. Vouchering MVNO Page 92 of 110 . Additionally. the system should inform certain users of the system. MVNE or ISP uses to run its business operations. download settings through OTA. Revenue Assurance Revenue assurance takes place on the field of collections. Collections Can be obtained through standard interfaces to third parties who can offer collections services. the possibility of offering SMS alerting or sending paper reminders may be adopted. Distribution & logistics Connectivity providers often are concerned with distribution / logistics operations when products are sold through customer care or online sales. A credit check can be integrated into the payment process if necessary. customers or customer care agents are always able to obtain real-time status information about orders. The role of Business Support Systems in a service provider is to cover four main areas: o Product Management o Customer Management o Revenue Management E-Commerce An e-commerce functionality that is fully integrated with online payments and distribution & logistics should be sought. Business Support System (BSS) A Business Support System (BSS) is a platform that a telephone operator.

On request. users.Vouchers are relevant for prepaid propositions or specific marketing events (discount codes). Using porting. services. CSV. perform credit checks place bulk orders System Management System management should provide information about running tasks. A typical implementation could become operational within a timeframe of 3-5 months. The possibility to import voucher batches from a third party and distribute these to dealers and agents should be available. interfaces etc. creating an overview of all number porting requests & status and the possibility to modify these. which can be exported to various formats (HTML. Postpaid. manage volume discounts and bulk ordering levels per dealer. settings should be changed for prices. hybrid or flat fee). Time to market The actual implementation duration depends on: • • • number of interfaces proposition (prepaid. Dealers can use the dealer module to: • • • sell products and perform in store activation of products and contracts. Dealer Support The dealer support enables the connectivity provider to: • • • manage dealers. imports. fixed and VOIP suppliers. PDF or Word). Number Porting The number porting is specifically required for MVNO's. perform order approval for dealer orders. Reporting Reporting must offer real-time standard reports. the connectivity provider can manage the porting process. MVNO Page 93 of 110 . loggings etc. In configuration management (as a part of system management). creating the possibility to analyse the data. It should be possible to outsource the number porting process to third parties. provided there are standard interfaces to existing parties which offer these services. Excel. actions. Availability of third parties and MVNO. additional user-specific reports should also be possible to be generated.

this has been based on all or most of the following: . a customer base. . For those that have enjoyed success for far. Most important. implementation fee and support & maintenance.technical maintenance (again during office hours or 24x7).setup & implementation infrastructure (in case of own environment) Yearly costs .license fee (a percentage of the initial fee .could be around 15%).Having efficient distribution channels . One time fee .setup & implementation. depending on modules purchased.functional maintenance (during office hours or 24x7). one should cobble together a partnership that consists of a connectivity of a regular telco. Maintenance fee is usually based on the number of subscribers in the base. To become an MVNO.license fee. . .Pricing (When buying a ready solution – from an MVNE) Pricing is usually based upon three components: license fee. . and a sales channel.Owning a strong brand or focusing on niche markets .Enjoying marketing skills .11 Critical Success Factors Generic • • • • • Identify latent opportunities Create innovative services Flexibility to provide customer-centric solutions Spread awareness of enterprise mobile messaging Ease of use 1st generation MVNO Despite their success so far. they need unique and compelling data services. is the cost significant lower than postpaid. • Minimum time to market and a flexible operation MNO access especially the ”new” countries: Page 94 of 110 MVNO . 6.Proposing innovative content Operational requirements to develop an effective MVNO business • Critical points for a successful launch – Back office what can and should the MVNO do and what can MNO and MVNE handle – Evaluating the cost of providing and managing the various aspects of back office operations and infrastructure – How can MVNO be smarter then MNO when it comes to cost and flexibility – Is prepaid THE optimum solution for an MVNO. today MVNOs are not differentiating much from each other by (new) value added services.

this have a serious impact on your choise of modell Focus on simple robust start up products Keep the number of interfaces to a minimimum to start with • Back office what can and should MVNO do and what can MNO and MVNE handle o Actual possibilities? Legal MNO Competence o Business case? MNO – trafic margin Cost for the different scenarious Be aware of all the ”extra” cost from the MNO o Can you find a flexible solution? Enabler Outsourcing partner As little as possible at least from day 1 Only tasks that is business critical for your overall mission Only tasks that make financial sense from day 1 • How can MVNO be smarter than MNO when it comes to cost o o o Evaluate what you must own and what you can rent .- o Time.go on “pay as you go” to keep your operational options open and your fixed opex and capex costs to a minimum Keep your dependencies to complex system at a minimum You do not need to control everything – but be in control • Is prepaid THE optimum solution for an MVNO? Is the cost significant lower then postpaid? o Prepaid upsides: – Better Cash flow – “No” bad debt – Pre-provisioned – No or lower billing cost – Transaction cost low – Often first service deployed for MVNO from MNO o Prepaid downsides – Worth of customer database lower – Churn higher – Residebntial ”only” – Channel cost high – Arpu lower (30-50%) – Services available • Roaming • GPRS • MMS • Content Page 95 of 110 MVNO . services and set up is not always free of choice Timeline: What is YOUR deadline.

economic flows and culture of the wireless industry for years to come. wholesale price and MVNO operational-support capabilities. Such decisions. to help determine the course of action to be taken. then expand. An intimate understanding of these elements is essential for MVNOs. These worries are unfounded. higher churn and less “Value” Postpaid is an option you shall consider from the business case side especially if you already have postpaid/Direct debit customers 6. this contract can become the weal link in the MVNO model. to some degree. If not undertaken correctly.12 Closing remarks New players are making their move: MVNOs are entering the wireless market because of its revenue potential.• • • • • No it is not the optimum solution but it is quick. Once an MVNO has partnered with a network operator and acquires a certain number of customers. concerns are growing about the dangers of excess competition and price commoditization. new MVNOs will need to craft an engaging value proposition for their target customers. determine the risk-reward profile of the venture. The same is true fro back end support structures (customer care. Separating from the carrier is not impossible. while if done well. A new business model in the wireless industry is emerging in which consumer spending on telecommunications and entertainment will merge. This expertise is readily available from outside providers. it becomes difficult to move these subscribers. with a decision based on variables such as network protocol. thereby locking the MVNO customer to the network. but a painful exercise. emerging broadband wireless technologies and compelling economics. it can power a strong value-creating business. to create a much larger and more profitable market. network quality. billing) where expertise is widely available. While individual performance will vary. MVNOs will have the dual benefit of making the market more efficient on the cost side and turbo charging the adoption of services on the revenue side. This highlights the importance of crafting a solid MVNO contract that includes margin protection to reduce business risk for the MVNO. MVNOs will change the structure. Aside from the carrier selection and deal negotiation. With the increasing number of MVNOs. The key here is the decision to either do-it-yourself or leverage through a third-party. supported by a business case built on assumptions and based on deep wireless expertise. Carrier choice will vary by MVNO. Each carrier will be strong in some categories and weak in others. but virtual operators and network carriers have the best chance of survival. There will be casualties. releases cash With your own IN you can keep quite flexible products Roaming is coming The cost will be lower but probably lower ARPU. MVNO Page 96 of 110 . the large pool of churn customers.

MVNOs should partner with an MVNE With an end-to-end solution With experience With features and functionality that add subs to drive profit MVNO Page 97 of 110 . especially when it is possible to combine best-price image with quality reputation Being the first makes also the difference Being the cheapest makes also the difference Mobile telephony offer is a good opportunity for extending a fashioned product line of a retailer MVNO or not MVNO is not the question : the best partnership must be the goal Considering a strong partnership rather than just one singular revenue sharing model opens door for other future interesting co-operations… Standard MVNOs Tips MVNOs should focus on branding and growing their business NOT the back office.1 Conclusions & Lessons to be learned To be Adopted Try to turn the market from offline to Online There is low cost setup implementation (in doing this) Have a strong technical platform with no or minimal maintenance or service failure Avoid fraud Utilize Outsourcing as it works better than in-house Partners DO contribute with their core knowledge Make sure that Supply chain is 100% solid and work with NO errors Arrange Risk sharing with MNO and/or MVNE Focus primarily on sales Make sure that Online marketing is available Approaching Communities is easy To be Avoided It is hard to get into the market (existence of strong players) Operators know how to compete o Long binding periods o Free minutes and SMS Regulation is non-existent or slow and ineffective Turning the market from offline to online is hard and takes time E-payment is not user friendly and it takes time for the user to get familiar with it The market is not as price sensitive as usually expected – even 30% lower prices is not enough Physical distribution is hard to beat online if you’re not patient o Is needed Viral marketing is misused by everybody in the Telcomarket Launching a low-cost proposition using an established brand is a key element for being prepared to the increasing level of aggressiveness and price pressure Brand compatibility makes the difference.7. Conclusions 7.

The GSM operators are vertically integrated and so can behave independently from upstream and downstream. It is because telecommunications are by essence a network economy that the market is inefficient from a competition point of view. but in several cases that was fatal 7.With on-demand scalability With the ability to deliver speed-to-market The right MVNE can deliver profitability to both the MVNO and the host operator. more content and data-based 3G market. the market shares it acquires during that period create this guaranteed income typical in an oligopoly market. However. the spectrum in mobile telephony).2 Conclusions regarding the future Referring to telecoms. The limited spectrum allows . These new operators will need the GSM network to complete their coverage and so will need to become MVNO. if the first entrant can exploit the spectrum ahead of its competitors. Data MVNOs Tips • Data Content MVNOs need all the same things as MNOs and other MVNOs. it is expected that the emergence of new (agile) wireless techniques will create new kinds of mobile operators not relying on GSM or UMTS. PLUS – Distinct and unique content – Highly topical content (rapidly changing) – Depend on their MVNE • MNOs need Data Content MVNOs – Drive more traffic – Control loss to alternate networks – But MNOs are poorly positioned to serve Content MVNOs • Challenges for Content MVNOs high – Content MVNOs need MVNEs to handle the “details” – MNOs need to open networks Beware • end-users have already experienced the deregulation activities in declining prices and simplified pricing schemes • many MVNOs have entered the market to learn the business and prepare themselves for the emerging. the termination and the roaming market could benefit from MVNO as a remedy. as: There is a guaranteed income due to the monopoly or oligopoly that popped up because the 3 or 4 GSM national licenses were not awarded at the same time. The MVNO brings a solution as it forces the mobile operators to unbundle its vertical integration and multiply the number of players. The MVNOs of today are customers centric. As such they are a remedy at least for the access/origination market.per country . Also. The MVNO model can in fact apply to any network economy with a technological context and with assets not easily replicable.only 3 or 4 operators with a radio access network. even in a non collusive way As within most network economies. the limiting factor for a fully efficient market is the owning of a rare resource not easy to replicate (the local loop in fix telephony. IMS has as an objective to create services that are irrespective of the underlying MVNO Page 98 of 110 . These new operators operating a different radio access networks will eventually become MVNO between each other.

g. Give the players a possibility to act as MVNOs with different strategies − service leaders must select a service mix they intend to offer − requires for modelling financial flows based on service demands per customer group and actual costs to produce a certain service MVNO Page 99 of 110 . When IMS will be standard. the need to run a service on several networks will become natural and the service provider will have to become a MVNO. billing and charging systems. 7. Implement MVNOs with fixed interconnection cost and the network capacity bought virtually from nowhere − MVNOS implement the cost leader strategy − significantly lower capital (approx. Introduce means for negotiation. VAS servers. 20% of MNOs costs) and operational expenditures − fixed interconnection prices determined by the game operator − restricted set of services a MVNO can offer 2.radio access network.3 Three improvement suggestions 1. the network capacity is bought from actual players − network capacity is bought for a certain period of time − switching costs for a MVNO due to investments to the network infrastructure (e. integration costs) − wholesale pricing options for MNOs who decide to sell excess capacity 3.

net/ www.mobilevirtualnetwork.au/ http://www.transatel.effortel.wimax-industry.com) Business plan Pro EUROSTAT http://www.co.tescomobile.com www.com/ http://www. References o o o o o o o o o o o o o o o o o o o o o o o o o o Personal Interviews with Mobile Operators Higher Management Deloitte Surveys (www.com/ www.kpmg.uk/ http://www.com/ http://www.siia. MVNO Page 100 of 110 .co.thebesengroup.co.com/ http:// www.com http://www.atosorigin.ovum.gsmworld.8.com http://www.gr http://www.statistics.mvnodirectory.com/ 9.uk/ http://www.uk http://www.takashimobile.uk/ http://www.com/ http://www.3gnewsroom.com/ http://www.com/ http://www.com/ http://www.uk http://www.analysysmason.mobilevirtualnetwork.deloitte.co.eurocomms.co.3G.com/ http://www.atkearney.pyr.com.com/ http://www.mobilein.

mobile operators are turning their strategies to increasing revenue share and focusing on customer retention. Western European mobile operator revenue Western Europe cellular market has reached a level of maturity that is intensifying the level of competition amongst mobile operators. In markets such as Germany. In Western Europe. In EU15 countries. Italy. and decline in effective voice price per minute. In 2008. Switzerland and Austria. and in a time of general economic slowdown. cellular revenues have decreased year on year.5% of Gross Domestic Product. value added services and market segmentation which includes MVNO development. Most countries are now home to 3-4 mobile operators. Figure 1: Western Europe Mobile Operators Total Revenues vs.6 billion Euros. competition is getting tougher. Operators are now focusing on revenue stimulation and fighting churn through key competitive factors such as: price elasticity. network coverage. Penetration Rate MVNO Page 101 of 110 . Telefonica O2 and TIM) generated revenues of 106.1 billion in 2007. Orange. 3. Our key finding is that in most countries. or 69% of the total revenues for the region. we expect to see a similar relatively healthy growth in mobile revenues. the top 5 operator groups (Vodafone. weakened ARPU.1 billion Euros in 2007. Belgium. which equates to a 3.32% growth year on year. mobile revenues have been growing faster than GDP which demonstrates that the telecom sector has proven to be resilient to the general economic downturn. loyalty policy. Greece and Italy have registered penetration rates above 150% in early 2008.Annex 1 . Total revenues in the region reached 155. partly due to: new European roaming regulations. cellular revenues represent 1. T-Mobile.32% growth from 2006. As market penetration continues to rise. quality of services. Western Europe recently passed the 500 million cellular connections mark and the most highly penetrated region in the World (120% on average). domestic regulations (Bersani Decree in Italy). Keeping the right balance between CAPEX and profitability is sure to be a key challenge for service providers that operate in the region. Non-voice revenues appear to be driving growth as voice revenues remain under strong pressure.Case Study – Western Europe Cellular revenues Total Revenues generated by mobile operators in Western Europe reached EUR155.

they were unable to offset the consequences of price pressure.5% in Q4. weakened ARPU and the implementation of cuts in termination rates.7% revenue growth) and Vodafone Germany (7. what has changed is that operators are now primarily focusing on customer retention instead of customer acquisition. O2 Germany. Vodafone. has reported a higher revenue growth (15.3% respectively between 2006 and 2007. Whilst there is nothing new in this.6 billion Euros last year.1%) have reported negative growth in their total revenues from 2006 to 2007 although their connections base grew by an average of 2% last year. This is partly due to pressure on voice pricing. 2008 The seasonality in revenue figures has remained unchanged since 2006: 24% in Q1.8% in Q2. or 3. By default. In Italy. in contrast. those two quarters have always ruled the market dynamics. the same rules apply for Vodafone and TIM.7% in Q3 and 25. TIM. For instance. This shows that the second half of the year is the period when operators generate the highest revenues. 25. Q3 holds the summer holiday season and is the battleground of prepay campaigns whilst Q4 is characterized by strong activity during the winter/Christmas holiday season. The decline is also justified by the MVNO Page 102 of 110 . T-Mobile Deutschland (2.9%) over the same period. It is interesting to note that a few markets have rapidly changed over the last two to three years mainly due to high penetration rates and new regulatory initiatives. Germany and Italy are showing signs of a high level of maturity that may lead to a plateau of development throughout 2009. representing nearly 70% of the total revenues in the region. Although both operators reported an increase in their installed base. 24. Both operators have reported a decline in total revenues of 5% and 2.Source: Wireless Intelligence. In terms of the dominance of major operator groups in the region. Orange. it also means that market leaders are turning their strategies to increasing revenue share instead of customer share. KPN. The remaining 30% is left to local operators and smaller groups such as Telenor. Telefonica O2 and T-Mobile’s operations in Western Europe altogether reached 106. Figures 2 and 3 show the top 10 fastest and slowest growing operators in terms of total revenue growth in 2007 along with their average quarterly connections growth.

implementation of the Bersani Decree which requires operators to eliminate top-up charges from all the rate plans and all top-up channels. As the Italian market is home to 90% prepaid users, the Bersani Decree had a substantial impact on revenues generated by operators since its implementation in March 2007. Figure 2: Top 10 fastest growing operators: Revenue growth vs. average quarterly connections growth, 2007

Source: Wireless Intelligence, 2008 Figure 3: Top 10 slowest growing operators: Revenue growth vs. average quarterly connections growth, 2007

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Source: Wireless Intelligence, 2008 Data usage drives revenue growth Recurring revenues have been estimated at 90% of the total revenues in Q4 last year. Voice revenues represent 78% of the recurring revenues and non-voice revenues hold the remaining 22%. Non-voice revenues show substantial growth of 18% from Q4 2006 to Q4 2007, demonstrating the take off of data usage. Voice revenues are under clear pressure in most markets as efforts from operators to stimulate voice usage have led to a decline in effective price per minute. Despite the competitive environment in Italy, Vodafone and TIM have registered strong growth in nonvoice revenues, with 25.8% and 22.2% growth respectively between Q4 2006 and Q4 2007. In Austria, Mobilkom reported that non-voice revenues represented 30% of its total recurring revenues in Q4 2007 compared to 24.1% in Q4 2006. T-Mobile Austria non-voice revenues represent 22.6% of its recurring revenues in Q4 last year against 15% in Q4 2006. In Portugal, the situation is similar with Optimus and TMN reporting high growth in non-voice revenues over the same period with 25% and 40% growth respectively (20% of their recurring revenues in Q4 2007). Italy, Austria and Portugal all have high penetration rates (over 120%) and have seen a fast adoption of high-speed services. WCDMA Family (WCDMA + WCDMA HSPA) connections already represent just over 15% of the total connections of Mobilkom Austria, T-Mobile Austria, TMN, and TIM. Optimus is already set at more than 30% and Vodafone Italy at 24%. The adoption of mobile broadband along with good network coverage have been key to fast adoption of data usage to drive an increase in non-voice revenues. It is interesting to note that data usage growth is mainly driven by the sales of USB-dongles, and more recently HSPA-enabled laptops. Along with the widespread of unlimited data plans (an average of 20 Euros per month in Western Europe), such offers tend to dilute ARPU but generate incremental cellular connections and incremental revenues for operators. Currently, mobile broadband services are only available to contract users but introducing such services to the prepay market (around 60% of the total connections in the region) will generate higher gains for operators and speed up the adoption of high-speed services.

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Mobile Revenues as a share of GDP According to the OECD (Organisation for Economic Co-operation and Development), the average yearly growth in GDP in 2007 was set at 2.6% in Western European markets (EU15 countries). Over the same period, mobile revenues accounted for 1.5% of GDP. Figure 4 shows mobile revenues as a share of GDP for the EU15 countries, and compares it to revenue growth and GDP growth in 2007. It shows how disparate Western European countries are and the difficulty in correlating cellular revenues growth and GDP growth. However, we came to the conclusion that in most countries, mobile revenues are growing faster than GDP. We can identify some groups of countries that seem to follow similar patterns and profiles: Greece, Finland, Ireland, Spain and Netherlands: all 5 markets have reported a growth in mobile revenues faster than GDP growth. In those markets, the average penetration is around 120% (a part from Greece already at 165%) and GDP growth in 2007 is around 4%. United Kingdom and Sweden: both markets have reported mobile revenues growth faster than GDP. The average penetration is around 120%, GDP growth in 2007 is around 3%. Portugal and Denmark: both markets have reported mobile revenues growth (around 6-7%) faster than GDP growth. The average penetration is around 120%, GDP growth in 2007 is around 3%. Germany, Belgium, Switzerland and Austria: average penetration is around 110%, GDP growth in 2007 is around 3%, but all four markets have reported a decline in mobile revenues in 2007. France and Italy: two exceptions. France is showing a market penetration below the 100% mark (82%) and GDP growth below the 3% average in 2007. Although it is reporting a 3.1% growth in mobile revenues last year, the market is lagging behind in terms of high-speed network coverage. Italy is highly penetrated (153%) and is reporting the slowest GDP growth amongst those countries (1.4%) in 2007. Its decline in mobile revenues is mainly due to implementation of new European and domestic regulations as well as price pressure amongst operators. Figure 4: Mobile Revenues as share of GDP, 2007

Source: OECD, Wireless Intelligence, 2008. GDP figures have been extracted from the OECD online database on the 02/09/2008.

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10. MVNO Page 106 of 110 .

There is price flexibility also in the mobile communication sector 2. Brand diversity is new in the mobile communication sector–but a recipe for success in many other lines of business. MVNO Page 107 of 110 .Annex 2 .MVNO Experience The highly competitive Nordic • • • • • The customers are harder to get then planned The internal procedures and the amount of work needed is underestimated Everything takes time and even though it is a ”light” solution many interactions has to be solved = You have to work in parallell Keep as much as possible simple and standard Telogic track record is 28 days – from start to commercial launch Conclusions 1.

3. Customers are not prepared to pay for everything that is technically feasible MVNO Page 108 of 110 .

Annex 3 . messaging. MVNO Page 109 of 110 .Glossary 3G 3rd generation mobile system 3GPP 3rd generation partnership program developing global specifications BSC Base Station Controller BTS Base Transceiver Station Core Network The systems that control traffic flowing to and from the RAN CRM Customer Relationship Management CS Circuit Switching GPRS General Packet Radio Service GSM Global System for Mobile Communications HLR Home Location Register ICT Information/Communication Technology IMS IP Multimedia Subsystem IMSI International Mobile Subscriber Identity IN Intelligent Network IP Internet Protocol ISN Intelligent Service Node IT Information Technology MGW Media Gateway MMSC Multimedia Messaging Service Center MNC Mobile Network Code MNO Mobile Network Operator (host) MSC Mobile services Switching Center MSS Mobile Switching Solution MVNE Mobile Virtual Network Enabler MVNO Mobile Virtual Network Operator NGN Next Generation Network OSS Operation and maintenance subsystem OTA Over-the-air technology PLMN Public Land Mobile Network Service Delivery Platform A platform used to deliver non-voice services to a mobile customer SGSN Serving GPRS Support Node SIM Subscriber Identity Module SMSC Short Message Service Center SS7 Signaling System no 7 UMA Unlicensed Mobile Access UMTS Universal Mobile Telecommunications Services VMSC Visited Mobile services Switching Center VAS Value Added Services VoIP Voice over IP VPN Virtual Private Network WAP Wireless Access Protocol Total revenue: Total operator reported revenue. and any other revenue not generated directly by network subscribers. Voice revenue: Recurring network revenue attributable to voice services. data. interconnection and roaming but excluding revenue from handset sales and connection fees. Commonly includes revenue from equipment. including all recurring and non-recurring revenues. Recurring revenue: Revenue generated by subscriber use of the network including voice. Non-recurring revenue: All revenue reported that is excluded from recurring revenue.

Switzerland and United Kingdom. Sweden. Spain. Germany. MVNO Page 110 of 110 . EU15 countries: Austria. Portugal. Greece. Belgium. GDP: Gross Domestic Product. France. Finland. Ireland. at constant prices. Netherlands. Internet browsing and other data services. GDP data has been sourced from the OECD online database on 02/09/2008. Italy. Denmark.Non-voice revenue: Recurring network revenue attributable to non-voice services including messaging. downloads.

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